IV\N  CROFT 


RUSSELL 


HAMPTONS 
MAGAZINE 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

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http://www.archive.org/details/collectionofsixaOOrussrich 


VOL.  XXIV 


MAY,  1910 


NO.  5 


HAMPTOr^'S  MAGAZINE 

Winning  an  Empire  and  the  Cost 
of  the  Winning 

A    HISTORY   OF   THE   METHODS   EMPLOYED   BY   THE   SOUTHERN    PACIFIC 
RAILROAD   SYSTEM   IN    MANUFACTURING  MULTIMILLIONAIRES 

By  Charles  Edward  ^Russell 

Author  of  "The  Heart  of  the  Kailrotui  Problem,"  "Beating  Men  to  Make  Them  Good,"  etc. 
Illustrations  by  Clarence  Rowe,  George  Varian,  and  C.  F.  Peters 


As  to  the  specific  cause  of  the  increased  cost  of 
living,  President  Taft  to-day  frankly  told  various 
of  his  callers  that  he  was  unable  to  account  for  it. — 
News  despatch  from  Washington,  December  30,  1909. 

JOHN  MILLER  came,  a  young  man,  from 
Virginia  to  California,  in  1870,  and  found 
employment  with  the  California  Pacific  Rail- 
road as  clerk  and  ticket  agent  at  the  South 
Vallejo  station.  He  was  capable  and  indus- 
trious; and  capable  railroad  men  were  few 
in  California. 

A  year  later,  when  some  men  in  the  rail- 
road way  at  Sacramento  wanted  an  efficient 
accountant  they  learned  of  Miller,  sent  for 
him,  looked  him  over,  and  thought  he  would 
do;  so  he  went  up  to  Sacramento  and  entered 
upon  his  new  job,  which  was  better  than  his 
old  one  had  been.  It  was  with  the  Contract 
and  Finance  Company,  of  which  a  kindly  old 
man  known  as  Uncle  Mark  Hopkins  was  the 
president.  The  office  was  right  over  Hunt- 
ington &  Hopkins'  hardware  store  in  K 
Street,  and  across  the  hall  were  the  offices  of 
the  Central  Pacific  Railroad,  of  which  Uncle 
Mark  Hopkins  was  treasurer  and  a  director. 

Young  Mr.  Miller's  task  was  to  assist  the 
paymaster  of  the  Contract  and  Finance  Com- 
pany, and  to  keep  books — not  the  main  books 
of  the  concern,  for  these  were  always  kept  by 
William  E.  Brown,  the  company's  secretary, 
but  certain  other  books  that  he  called  aux- 
iliary books. 

To  build  and  keep  in  repair  the  lines  of  the 
Central  Pacific  and  of  railroads  with  other 
names  was  the  business  of  the  Contract  and 
Finance  Company,  but  the  books  that  young 
Mr.  Miller  kept  did  not  contain  a  complete 


record  of  these  matters ;  they  related  to  minor 
phases  of  the  work  in  hand. 

Young  Mr.  Miller  was  observant  as  well 
as  studious,  and  when,  some  months  after  he 
entered  the  office,  he  observed  Mr.  Brown  to 
be  employed  diligently  upon  the  main  books 
of  the  concern,  the  nature  of  this  employ- 
ment aroused  young  Mr.  Miller's  curiosity. 
He  took  occasion  when  Mr.  Brown  was  ab- 
sent to  examine  the  books  that  Mr.  Brown 
kept,  and  found  them  to  contain  matter  of 
much  interest. 

In  fact,  the  more  he  examined  them,  the 
more  interested  he  became.  They  were 
books  that  recorded  the  building  and  repair- 
ing of  railroad  lines  for  the  Central  Pacific 
— what  the  work  actually  cost  and  what  had 
been  paid  for  it  * — and  might,  therefore,  be 
deemed  to  be  among  the  most  juiceless  and 
unattractive  volumes  in  the  world ;  but  young 
Mr.  Miller  found  them  remarkably  diverting. 

Finally,  he  became  so  much  interested  that, 
like  the  careful  student  he  was,  he  made  from 
day  to  day  a  series  of  abstracts  and  memo- 
randa of  the  matter  wherewith  he  was  being 
entertained,  and  these  he  took  home,  per- 
haps for  more  deliberate  enjoyment  in  quiet 
hours. 

MR.  MILLER  KEEPS  HIS  LITERARY  TREASURES 
SECRET 

He  did  not  let  Mr.  Brown  nor  anyone  else 
know  of  the  literary  treasures  he  had  found, 
but  just  read  and  made  abstracts  and  copies 
and  put  them  away. 

*  Pacific  Railroad  Commission  Report,  testimony  of  Miller, 
pp.  2881-82. 


603 


604 


Hampton's  Magazine 


I  am  not  to  suppose  that  he  knew  Charles 
Reade's  "Hard  Cash,"  that  he  was  familiar 
with  the  character  of  Young  Skinner  therein, 
nor  that  suspicion — evil  sprite! — had  been 
aroused  in  his  breast  by  Reade's  somewhat 
cruel  jest  about  man  as  a  cooking  animal: 
but  unconsciously  he  came  to  enact  rather 
closely  a  vivid  passage  in  a  sensational  novel, 
the  while  he  furnished  a  significant  chapter 
in  railroad  history. 

Of  a  sudden,  one  day  in  September,  1873, 
Mr.  Brown  entered  the  office  and  hailed 
young  Mr.  Miller  with  glad  tidings. 

"The  Contract  and  Finance  Company  has 
elected  you  to  the  office  of  secretary,"  said 
Mr.  Brown.  "  I  have  resigned  and  am  going 
to  Europe.  And  now  here  is  a  set  of  new 
books  for  you  to  go  to  work  with." 

Young  Mr.  Miller  was  duly  gratified.  He 
took  possession  of  the  nice  new  books  and 
observed  that  they  had  already  been  opened 
in  Mr.  Brown's  handwriting,*  each  account 
starting  with  a  balance  apparently  carried 
over  from  the  old  books. 

About  noon  he  went  forth,  as  was  his  habit, 
to  his  midday  repast,  leaving  Mr.  Brown  in 
the  office  with  the  old  books  and  with  the 
new.  When,  an  hour  later,  he  returned  he 
found  Mr.  Brown  there  and  the  new  books 
there,  but  the  old  books  had  disappeared, 
nor  did  young  Mr.  Miller  ever  see  them  again. 

So  far  as  the  world  knows,  only  two  other 
persons  had  that  pleasure. 

Some  time  after  Mr.  Miller  had  departed 
in  search  of  luncheon,  in  came,  for  no  par- 
ticular purpose,  young  Mr.  Yost.  Mr.  Yost 
was  private  secretary  to  Mr.  Leland  Stan- 
ford, who  was  President  of  the  Central  Pacific 
and  one  of  the  owners  of  the  Contract  and 
Finance  Company.  Mr.  Yost  saw  the  old 
books.  He  saw  them  in  the  hands  of  Uncle 
Mark  Hopkins.  And  Uncle  Mark,  with  his 
coat  off,  was  busily  at  work  packing  those 
books  into  boxes  and  fastening  the  boxes  with 
screws. f 

The  next  day  Mr.  Brown  started  for  Eu- 
rope. Thereafter  all  trace  of  the  old  books 
was  lost;  also  all  trace  of  the  books  of  Charles 
Crocker  and  Company,  the  contracting  firm 
to  which  the  Contract  and  Finance  Com- 
pany was  the  successor. 

By  some  persons  the  loss  was  grievously 
mourned,  these  being  chiefly  persons  that  had 
certain  lawsuits  and  needed  the  books  for 


*  Pacific  Railroad  Commission  Report,  testimony  of  Miller, 
pp.  2880-92. 
i  Ibid.,  testimony  of  D.  Z.  Yost,  p.  2717. 


evidence.  But  their  grief  availed  them  noth- 
ing, even  when  it  led  them  to  cause  the  arrest 
of  the  most  eminent  officers  of  the  Central 
Pacific  and  when,  in  a  dirty,  common  police 
court,  these  gentlemen  were  compelled  to 
declare  their  ignorance  about  the  books  that 
never  were  found.  According  to  a  current 
belief  in  California  these  books  now  repose 
at  the  bottom  of  the  River  Seine,  which  is  in 
France;  and  that  seems  a  very  strange  place 
indeed — for  books  to  repose  in. 

MR.    MILLER    IS    ARRESTED    ON    CHARGES    OF 
EMBEZZLEMENT 

For  about  a  year  young  Mr.  Miller  dis- 
charged the  duties  of  secretary  to  the  Con- 
tract and  Finance  Company,  being  also  made 
secretary  to  the  Western  Development  Com- 
pany, another  very  nice  company  with  much 
the  same  owners  and  exactly  the  same  pur- 
poses. 

Some  suspicion  then  arose  that  his  books 
and  accounts  were  not  in  the  admirable  and 
apple-pie  order  to  be  expected  of  first-class 
accountants  and  really  nice  companies,  and 
Mr.  J.  O'B.  Gunn,  auditor  of  the  Central 
Pacific,  made  a  quiet  observation  of  these 
matters.  On  his  oral*  report,  young  Mr. 
Miller  was  arrested  and  indicted,  charged 
with  embezzlement.  We  are  not  to  suppose 
that  he  had  been  corrupted  by  evil  example, 
which  is  ever  in  wait  for  youth,  but  only  that 
he  had  grown  careless,  maybe,  or  something 
of  that  kind. 

He  was  not  at  once  prosecuted,  possibly 
because  of  his  youth  or  good  looks.  Instead, 
certain  negotiations  began,  lasting  for  a 
month,  in  which  young  Mr.  Miller  was  every 
day  in  consultation  with  the  highest  officers 
of  the  Central  Pacific,!  who  were  also,  by  a 
curious  coincidence,  the  highest  officers  of  the 
Contract  and  Finance  Company  and  its  sole 
owners. 

After  a  time,  Mr.  Miller's  wife  called  upon 
former  Judge  N.  Greene  Curtis  (who  had 
once  defended  a  man  for  the  Central  Pacific) 
and  engaged  him  as  her  husband's  counsel. 
To  him  Mr.  Miller  delivered  all  his  memo- 
randa and  abstracts. 

The  trial  of  Mr.  Miller  took  place  in  San 
Francisco,  whither  meantime  the  offices  of  all 
the  companies  here  mentioned  had  been  re- 
moved. All  the  witnesses  against  him  were 
officers  and  employees  of  the  Central  Pacific.J 

*  Pacific  Railroad  Commission  Report,  testimony  of  Gunn, 

P-  3003. 

t  Ibid.,  testimony  of  Miller,  p.  2888. 
tibid. 


HOW  THE  WELLS-FARGO  EXPRESS  WENT  THROUGH   IN  THE  DAYS  BEFORE 

THE  RAILROAD. 
60s 


606 


Hampton's  Magazine 


It  appears  that  the  prosecution  was  af- 
flicted with  a  kind  of  languor,  resulting  per- 
haps from  the  climate,  which  is  known  to 
be  at  times  enervating.  Young  Mr.  Miller 
was  acquitted.  From  the  courtroom  former 
Judge  Curtis  went  straightway  to  his  room 
in  the  Cosmopolitan  Hotel,  took  all  the  ab- 
stracts and  memoranda  that  Mr.  Miller  had 
given  to  him,  and  put  them  into  the  grate, 
where  doubtless  they  were  presently  con- 
sumed *  in  a  cheerful  blaze. 

These  abstracts  and  memoranda  were  of 
the  cost  of  the  work  done  by  the  Contract 
and  Finance  Company  and  the  amounts  re- 
ceived therefor,  f 

Young  Mr.  Miller,  thus  happily  cleared 
from  blame,  disappeared  from  the  public 
view.  The  next  heard  of  him  was  as  a  pros- 
perous farmer  and  owner  of  a  fine  ranch  in 
the  Sacramento  Valley,  and  as  a  buyer  of  coal 
lands. J  As  previously  he  had  been  an  ac- 
countant on  a  moderate  salary,  followed  by 
a  year  of  idleness  and  (presumably)  heavy 
legal  expenses,  this  affluence  occasioned  some 
remark.  Mr.  Miller  farmed  on,  neverthe- 
less, and  so,  by  a  figure  of  speech,  did  the 
Contract  and  Finance  Company,  the  Western 
Development  Company  and  the  Central  Pa- 
cific Company. 

All  this,  it  will  be  admitted,  is  of  itself  a 
strange  and  entertaining  little  narrative.  And 
now  to  fit  it  into  its  true  place  in  Southern 
Pacific  history,  where,  properly  viewed,  I  am 
sure  you  will  greatly  admire  it. 

CHARLES  Crocker's  contracting 

TRANSACTIONS 

The  contracting  firm  of  Charles  Crocker 
and  Company  was  composed  of  Mr.  Charles 
Crocker  and,  according  to  his  testimony,  of 
nobody  else.  Previously,  he  had  been  a  dry 
goods  merchant  in  the  Plaza  at  Sacramento 
and  then,  in  1861,  one  of  the  organizers  and 
first  directors  of  the  Central  Pacific.  He  was 
the  contractor  that  built  for  that  road  its  first 
few  miles.  The  dual  capacity  of  director 
and  contractor  (by  which,  of  course,  a  man 
must  as  director  vote  contracts  to  himself 
as  contractor)  seems  to  have  aroused  criti- 
cism among,  doubtless,  the  captious  and  un- 
sympathetic, and  the  next  few  miles  were 
done  by  many  contractors  in  small  bits. 
When  undesirable  persons  had  been  frozen 
from   the  enterprise,  Mr.  Crocker  resigned 

*  Pacific  Railroad  Commission  Report,  testimony  of  Curtis, 

P-  3033- 

t  Ibid.,  testimony  of  Miller,  p.  2880 
i  Ibid.,  p.  2891. 


from  the  directorate,  where  he  was  succeeded 
by  his  brother,  and  took  the  contract  for  the 
rest  of  the  road  from  the  thirty-first  mile  to 
a  point  near  the  state  boundary,  or  one  hun- 
dred and  thirty-eight  miles  from  Sacramento. 

This  contract  disappeared  with  the  books 
that,  in  1873,  young  Mr.  Yost  saw  Mr.  Hop- 
kins pack  into  boxes. 

So  far  as  can  now  be  ascertained,  it  must 
have  been  of  extremely  loose  terms.  No 
lump  sum  was  named.  Mr.  Crocker,  com- 
posing the  firm  of  Charles  Crocker  and  Com- 
pany, built  the  railroad,  and  the  Central 
Pacific  Company  paid  his  bills  whatever 
they  were  and  without  question.  This  seems 
to  have  been  the  substance  of  the  arrange- 
ment. 

As  the  firm  composed  of  one  man  went 
along  it  needed  money,  which  was  supplied 
to  it  (or  to  him,  as  you  prefer)  by  the  Central 
Pacific  Railroad  Company,  consisting  of  him- 
self and  three  others,  from  the  proceeds  of 
bonds  that  had  been  granted  by  the  govern- 
ment. 

He  was  supplied  also  with  the  bonds  them- 
selves, and  with  the  company's  stock.  He 
said  afterwards  that  for  the  first  eighteen 
miles  he  received  $250,000  in  cash,  $50,000 
in  stock,  and  $100,000  in  bonds.* 

It  is  interesting  to  note  that  for  at  least 
eleven  of  these  miles  the  Central  Pacific 
Company  received  from  the  government 
$528,000,  which  was  more  than  enough  to 
build  the  whole  eighteen. 

For  some  of  the  miles  Charles  Crocker  and 
Company  secured  as  much  as  $300,000  or 
even  $400,ooof  a  mile.  For  excavating  earth 
they,  he,  or  it,  received  from  40  cents  to  $1.50 
a  yard,  and  for  excavating  rock  as  much  as 
$10  a  yard. I 

In  1867,  the  one-man  firm  completed  the 
one  hundred  and  thirty-eighth  mile,  and  the 
remainder  of  the  work  was  transferred  to  the 
Contract  and  Finance  Company,  of  which 
young  Mr.  Miller  was  subsequently  the  sec- 
retary. 

I  said  in  my  article  last  month  that  for  a 
very  peculiar  reason,  Mr.  Crocker  did  not  re- 
tain the  stocks  and  bonds  he  received  for  his 
work  in  constructing  the  railroad.  The  pe- 
culiar reason  was  that  he  turned  over  all 

*  Pacific  Railroad  Commission  Rejxirt,  testimony  of  Charles 
Crocker,  p.  3640. 

t  Ibid.,  p.  3645. 

t  Ibid.,  p.  3649. 

Question.  If  I  should  recall  it  to  your  mind,  would  you  re- 
member that  the  higher  priced  excavation  was  very  much  larger 
in  number  of  yards  entered  on  your  estimate  from  which  you 
received  your  payments,  than  the  ordinary  earth? 

Answer.    I  do  not  remember  about  it. 


Winning  an  Empire  and  the  Cost  of  the  Winnii 


607 


these  securities,  amounting  to 
more  than  $10,000,000,*  to  his 
successor,  the  Contract  and  Fi- 
nance Company,  which  immedi- 
ately distributed  them  among  its 
stockholders. 

And  who  were  they? 

Messrs.  Leland  Stanford,  C, 
P.  Huntington,  Mark  Hopkins, 
and  Charles  Crocker. 

It  is  time  we  should  take  a  look 
at  this  extraordinary  concern,  for 
^  the  part  it  played  in  the  affairs  of 
our  railroad,  as  well 
its   relations  to 


*  Piicific  Railroad    Com- 
mission Report,  p.  .^649. 


MARK  HOPKINS  HIMSELF  PACKED  UP  THE 

OLD     BOOKS    OF    THE    CONTRACT    AND 

FINANCE    COMPANY.    THEY    THEN 

MYSTERIOUSLY  DISAPPEARED. 


public    interests     now, 

are  of  vital  importance. 

The   Central   Pacific 

Railroad  Company  was 

organized  under  the 

constitution  and  laws  of 

California,  which  forbid 

the  stock  of  a  railroad 

company  to   be  issued 

except  for  cash  or  its 

equivalent.     Not  less  than  ten  per  cent  must 

be  paid  for  when  the  railroad  is  organized 

and  the  rest  by  installments — in  cash  or  its 

equivalent. 

Also  these  laws  forbid  a  railroad  to  issue 
bonds  in  excess  of  its  stock.* 

As  fast  as  the  railroad  was  constructed  it 
was  receiving  $48,000  a  mile  from  the  gov- 
ernment and  lit  was  also  authorized  to  issue 
its  own  bonds  for  the  like  amount,  but  it 
could  not  do  this  in  excess  of  its  stock  issue. 
Observe,  therefore,  that  it  was  obliged  to 

*  See  Section  456  of  the  Civil  Code. 


608 


Hampton's  Magazine 


issue  stock  before  it  could  issue  its  bonds, 
and  for  the  stock  issued  it  was  obliged  to  pay 
in  cash  or  its  equivalent. 

Now,  bills  of  a  contractor  for  work  done 
in  constructing  a  railroad  are  to  that  railroad 
clearly  the  equivalent  of  cash. 

The  company  had  started  with  $8,500,000 
of  capital  stock.  As  the  work  went  on  this 
was  increased  to  $20,000,000  and  finally 
reached  $100,000,000,  issued  from  time  to 
time  as  required,  until  in  1873  the  amount 
had  reached  $62,608,800. 

Naturally,  the  four  gentlemen  conducting 
the  enterprise  desired  to  get  possession  of 
that  stock  (which  carried  with  it  control  of 
the  road)  and  to  get  it  without  paying  for  it. 
One  way  to  that  desirable  result  was  through 
a  contracting  agency  that  would  present  bills 
for  its  work  (these  bills  being  its  equivalent 
of  cash),  accept  in  payment  thereof  the  stock 
and  bonds  of  the  company,  and  subsequently 
return  these  securities,  less  the  actual  expenses, 
to  the  four  gentlemen.  The  greater  its  bills 
the  more  stock  would  thus  be  sent  upon  the 
circuit.  All  that  was  needed  for  the  perfec- 
tion of  this  device  was  a  good  handy  pretext 
for  the  final  distribution  of  the  accumulated 
securities  among  the  four  gentlemen. 

A  firm  composed  of  one  person  could  not 


very  well  perform  this  function,  but  to  a  cor- 
poration it  was  easy,  because  a  corporation 
can  always  distribute  its  assets  among  its 
stockholders.  If  the  Central  Pacific  stock 
composed  the  assets  of  such  a  corporation 
and  the  stockholders  among  whom  they 
were  to  be  distributed  were  the  four  gentle- 
men, how  lovely  that  would  be! 

To  suppose  that  these  conclusions  so  obvi- 
ous to  you  and  me  escaped  the  attention  of 
the  four  wise  gentlemen  of  Sacramento  were 
to  wrong  their  intellectual  acumen;  only,  since 
Uncle  Mark  Hopkins'  exploits  as  a  book  pack-i 
er,  the  details  of  their  operations  are  obscure. 

Still,  you  may  care  to  note  that  in  Decem- 
ber, 1867,  the  Contract  and  Finance  Com- 
pany was  organized  with  a  capital  of  $5,000,- 
000 — not  one  cent  of  which  was  ever  paid 
for — by  three  dummy  organizers  *  who  subse- 
quently transferred  their  stock  to  Messrs. 
Stanford,  Huntington,  Hopkins,  and  Crocker, 
and  that  this  company  received  Mr.  Crocker's 
$10,000,000  of  securities  and  properly  dis- 
tributed them,-j-  where  they  would  do  the 
most  good — to  Messrs.  Stanford,  Huntington, 
Hopkins,  and  Crocker. 


*  Pacific  Railroad  Commission  Report,  testimony  of  William 
E.  Brown,  p.  2895. 
t  Ibid.,  testimony  of  Charles  Crocker,  Brown,  and  others. 


INDIANS  ATTACKING  THE  UNION   PACIFIC— THE  RAILROAD  AT  TIMES  HIRED 
EX-SOLDIERS  FOR  ITS  DEFENSE. 


Winning  an  Empire  and  the  Cost  of  the  Winning 


I 

^Kance  Company  pro- 
ceeded with  the  construc- 
tion work  from  the  one 
hundred  and  thirty- 
eighth  mile  to  the  junc- 
tion with  the  Union  Pa- 
Iific,  fifty  -  three  miles 
rest  of  Ogden. 
Of  the  extravagant  ex- 
enditures  caused  by  the 
insane  race  for  mileage 
with  the  Union  Pacific 
we  have  already  spoken. 
How  much  other  unjusti- 
fied expense  appeared  on 
the  books  will  never  be 
known. 

^ft  When  the  Pacific  Rail- 

^^bad  Commission  tried  to 
ascertain  the  facts,  its  ex- 
pert engineer  presented 
to  it  a  statement  that  the 
entire  line  of  the  Central 
Pacific  from  Sacramento 
to  five  miles  west  of  Og- 
den, 690  miles,  cost  to 
construct  $32,589,117.93. 

Adding  the  $2,130,000  paid  to  the  Union 
Pacific  for  the  overlapped  parts,  this  makes 
the  total  construction  cost  $34,719,117.93,  or 
$50,317  a  mile.* 

How  much  of  this,  again,  is  real,  nobody 
knows,  but  if  we  accept  it  as  veritable,  there 
was  to  offset  it: 

United  States  government  bonds.  .  $27,500,000 
Central   Pacific    bonds    practically 

guaranteed  by  the  government...  .  27,500,000 

Land  Grant  f 30,000,000 

Assistance     voted     by     California 

counties 1,000,000 


609 


LOUIS    McLANE.    MANAGER    OF    WELLS. 

FARGO  AND  COMPANY.    BY  THREATS 

OF  COMPETITION  THE  BIG  FOUR 

SECURED  ONE  THIRD  OF 

ITS  STOCK. 


t  $86,000,000 

ess  alleged  cost  of  construction. . . .     34,719,147.93 
And  depreciation  of  currency  J 7,000,000 


road  Company  deliv- 
ered to  Charles  Crocker 
and  Company  and  the 
Contract  and  Finance 
Company  $62,000,000  * 
of  Central  Pacific  stock, 
and  this  treasure  trove 
was  divided  as  assets 
among  the  stockholders 
of  the  Contract  and  Fi- 
nance Company. 
And  who  were  they? 
Messrs.  Stanford, 
Huntington,  Hopkins, 
and  Crocker,  who  were 
also  the  chief  owners  of 
the  Central  Pacific,  who 
never  paid  a  cent  for 
their  Contract  and  Fi- 
nance stock,  and  who  by 
this  device  secured  also 
$62,000,000  of  Central 
Pacific  stockwithoutpay- 
ing  a  cent  for  that.f 

On  this  stock  so  ob- 
tained were  declared  in 
the   next   seven  years 
dividends  amounting  to 
$12,000,000 — all  obtained  from  the  con- 
tributions of  the  public. 

When  these  matters  came  many  years  after- 
wards to  be  reviewed.  Governor  Stanford 
tried  to  show  that  when  the  construction  work 
was  done,  the  Contract  and  Finance  Com- 
pany owed  a  great  deal  of  money — several 
million  dollars,^  in  fact. 

This  statement  led  to  a  remarkable  revela- 
tion. WTien  William  E.  Brown,  former  sec- 
retar}'  of  the  Contract  and  Finance  Company, 
was  asked  about  the  matter,  he  said  that  at 
the  end  of  the  construction  period  the  Con- 
tract and  Finance  Company  owed  (presum- 


■  Balance $44,280,882  .07 

In  other  words,  they  built  the  road  for 
about  one  half  of  the  government  sub- 
sidy and  pocketed  the  rest. 

Other  goodly  profits  pertained  to  these  mat- 
ters, and  on  top  of  all,  the  Central  Pacific  Rail- 

*  William  E.  Brown,  Secretary  of  the  Contract  and  Finance 
Company,  testified  (see  p.  28Q7  of  the  Pacific  Railroad  Com- 
mission Report),  that  his  company  got  $86.odo  a  mile  for  con- 
struction. 

t  Before  the  Forty-Eighth  Congress,  Representative  Barclay 
Henley  showed  that  the  whole  road  could  have  been  constructed 
for  its  land  grant  alone. 

t  Pacific  Railroad  Commission  Report,  testimony  of  Stanford, 
p.  2465. 


*  Up  to  1873,  when  the  last  division  of  stock  took  place.  The 
progress  of  these  operations  may  be  seen  readily  from  the  follow- 
ing table  of  the  capital  stock  of  the  Central  Pacific  Railroad 
Company: 

Year  Amount 

1866 $8,580,600 

1867 14,923,400 

1868 24,670,000 

1869 40,168,100 

1870 51,079,200 

1871 59,644.000 

1872 59,644.000 

1873 62,608.800 

t  Question.  Then  it  was,  substantially,  that  the  builders  of 
the  road  under  the  contract  should  take  all  the  bonds  of  what- 
ever character  there  were,  as  you  have  stated,  and  the  amount 
of  stock  to  authorize  you  to  issue  those  bonds  under  your  own 
first  mortgage? 

Answer.     Yes.  sir. 

Pacific  Railroad  Commission  Report,  testimony  of  Leland 
Stanford,  p.  2646. 

X  Ibid.,  Stanford's  testimony,  p.  2669. 


610 


Hampton's  Magazine 


ably  to  Messrs.  Stanford,  Huntington,  Hop- 
kins, and  Crocker)  $1,636,000,  against  which 
it  held  the  notes  of  the  Central  Pacific  Com- 
pany for  $6,000,000,  and  that  in  payment 
of  the  $6,000,000  of  notes  the  Central  Pacific 
(owned  by  the  same  men)  delivered  $7,- 
000,000  of  land  grant  bonds  ;  *  so  that  in- 
stead of  being  a  debtor  when  it  completed  its 
work,  the  Contract  and  Finance  Company 
was  a  peculiarly  happy  kind  of  a  creditor. 

EVERYTHING   WENT   TO   THE   BIG   FOUR 

And  what  became  of  those  $7,000,000  of 
bonds  exchanged  for  $6,000,000  of  notes  held 
against  $1,636,000  of  debt? 

Why,  all  went  by  the  assets  route  to  the 
pockets  of  the  same  wise  and  fortunate  four, 
Messrs.  Stanford,  Huntington,  Hopkins,  and 
Crocker.f 

Subsequently,  all  these  assets  with  the  $62,- 
000,000  of  stock  obtained  for  nothing  and  all 
the  other  perquisites,  "melons,"  good  things, 
graft,  "rake-offs,"  and  clever  deals,  were 
merged  into  one  of  the  most  valuable  railroad 
stocks  in  the  world,  on  which  to  this  day  we 
are  paying  the  colossal  interest  charges. 

But  in  estimating  the  immediate  profits  of 
the  Big  Four  we  must  not,  to  be  sure,  over- 
look the  fact  that  for  a  part  of  the  time  of 
construction,  currency  was  much  depreciated 
and  its  depreciation  added  heavily  to  the  cost 
of  everything  that  was  bought.  But  the  real 
building  work  was  done  after  the  end  of  the 
war  when  currency  was  rising  in  value — and 
the  first  mortgages  were  gold! 

Moreover,  to  offset  the  loss  on  currency 
were  some  items  usually  neglected  in  these 
considerations. 

Thus,  the  road  was  operated  as  fast  as  it 
was  built  as  part  of  a  continental  rail  and 
stage  line,  and  from  this  operation  there  ac- 
cumulated, by  1869,  above  all  expense  and 
interest  charges,  close  upon  $3,000,000  of  net 
profits. 

Also,  to  head  off  a  rival  line  building  east- 
ward to  Placerville,  the  wise  and  happy  four 
built  a  connecting  wagon  road  from  Dutch 
Flat  through  the  Carson  Valley  (charged  to 
Central  Pacific  construction  account),  and 


*  Pacific  Railroad  Commission  Report,  Brown's  testimony, 
p.  2682. 

t  "It  is  found  that  Messrs.  Stanford,  Huntington,  Hopkins,  and 
Crocker  received  over  $142,000,000  in  cash  and  securities 
through  the  Contract  and  Finance  Company,  Western  Develop- 
ment Company,  and  Pacitic  Improvement  Company,  and  divi- 
dends of  the  Central  Pacific.  In  addition  to  this  sum  of  $142,- 
000,000  they  also  made  large  profits  in  the  operation  of  fifteen 
or  more  companies  which  were  directly  or  remotely  sapping  the 
revenues  of  the  Central  Pacific  Company." 

Pacific  Railroad  Commission  Report,  p.  143. 


this  road  gathered  for  them  at  trifling  ex- 
pense tolls  estimated  at  $3,000,000  * — an 
enterprise  that  had  the  further  advantage  of 
ruining  the  rival  railroad  so  that  it  fell  by  its 
own  collapse  into  the  Central  Pacific's  pos- 
session, f 

OTHER    FORTUNE-MAKING   MACHINES    OF    THE 
BIG   FOUR 

No  sooner  was  the  first  transcontinental 
railroad  line  opened,  the  gateway  established, 
and  the  toll  taker  at  work,  than  the  four  thus 
pleasantly  endowed  began  to  establish  other 
gates  to  take  further  toll.  They  had  started 
with  next  to  nothing  apiece,  and  now,  after 
nine  years,  they  shared  a  stupendous  fortune 
that  was,  indeed,  much  more  than  wealth  in 
hand  since  it  was  an  infallible  and  unceasing 
machine  for  gathering  more  and  still  more 
wealth. 

As  they  constructed  the  Central  Pacific,  it 
stopped  at  Sacramento,  ninety  miles  east  of 
San  Francisco,  with  which  the  Sacramento 
River  connected  it,  as  did  also  the  Western 
Pacific,  another  and  earlier  railroad  project, 
liberally  aided  with  government  grants  as  an 
incipient  transcontinental  route.  The  main 
line  of  the  Western  Pacific  really  ended  at 
San  Jose,  fifty  miles  south  of  San  Francisco, 
but  it  had  a  branch  to  Oakland  on  San 
Francisco  Bay  and  opposite  the  city. 

In  1867  the  contractors  that  had  under- 
taken to  build  the  Western  Pacific  became 
"embarrassed,"  and  the  Contract  and  Fi- 
nance Company  completed  the  road  and 
took  all  of  the  stock,  issued  and  unissued,  all 
the  bonds  and  all  of  the  land  grants  not 
previously  allotted  to  the  first  contractors, 
delivering  the  whole  to  the  Central  Pacific, 
composed  of  Messrs.  Stanford,  Huntington, 
Hopkins,  and  Crocker.  The  land  grants  were 
exceedingly  rich  and  the  possession  of  the 
road  thus  cheaply  secured  carried  the  Central 
Pacific  from  Sacramento  to  San  Francisco 
Bay  and  gave  it  an  invaluable  terminus. | 

Another  rival  road,  the  California  Pacific, 
had  been  projected  to  build  over  the  Beck- 
with  pass  through  the  Sierras  to  an  Eastern 

*  By  Daniel  \V.  Strong,  who  was  a  Dutch  Flat  pioneer  and  one 
of  the  original  founders  of  the  Central  Pacific 

t  Bancroft's  "History  of  California,"  p.  553. 

t  The  true  nature  of  this  transaction  is  now  not  likely  to  be 
disclosed,  but  the  reason  for  the  first  contractors'  troubles 
seems  to  have  aroused  some  speculation.  In  Robinson  versus 
the  Central  Pacific  filed  in  San  Francisco  in  1876,  very  dam- 
aging allegations  are  made  concerning  the  matter,  the  sub- 
stance thereof  being  that  the  Central  Pacific  unfairly  obtained 
$2,000,000  of  Western  Pacific  bonds  and  about  $3,000,000  of 
other  valuable  properties.  It  is  certain  that  the  Western  Pacific 
cost  the  Central  Pacific  little  and  was  an  immen.sely  profitable 
acquisition. 


1 


I 


Winning  an  Empire  and  the  Cost  of  the  Winning 


611 


connection.  In  1869  it  was  completing  its 
line  from  Vallejo  to  Sacramento  by  a  shorter 
and  better  route  than  the  Western  Pacific. 
The  Central  Pacific  tried  hard  to  keep  the 
California  Pacific  from  entering  Sacramento, 
and  at  one  time  a  pitched  battle  between  the 
armed  forces  of  the  two  companies  was  im- 
minent; but  while  the  contestants  were  wait- 
ing for  a  court  decision,  the  California  Pacific 
stole  a  march  and  got  into  the  city.*  This  was 
in  1870. 

Being  thus  defeated,  the  Central  Pacific 
had  recourse  to  strategy.  In  187 1,  it  agreed 
to  buy  the  California  Pacific  for  $1,579,000. 
It  had  previously  secured  from  it  a  contract 
for  the  Contract  and  Finance  Company  to 
-build  and  repair  certain  sections  of  line. 
When  this  work  was  done,  the  Contract  and 
Finance  Company  presented  a  bill  for  $1,600,- 
000,  which  neatly  offset  the  purchase  price  f 
and  left  a  margin.  Some  bonds  were  used 
as  counters  in  this  unique  deal,  but  the  sub- 
stance of  it  was  that  the  happy  four  got  the 
California  Pacific  practically  for  nothing. 

LEASES    ADD    TO    THE  WEALTH  OF    THE  FOUR 

They  now  went  through  the  formality  of 
leasing  it  to  themselves  for  $550,000  a  year, 
afterwards  increased  to  $600,000.  The  par 
value  of  the  stock  was  $12,000,000,  having  an 
actual  value  of  less  than  $3,000,000,  secured 
for  practically  nothing  and  charged  up  to  the 
public  at  $550,000  a  year. 

Twenty-four  years  later  the  sworn  value  of 
this  property  was  $1,404,935  and  all  that  time 
$550,000  to  $600,000  on  its  account  had  been 
extracted  annually  from  the  public  by  the 
four  of  Sacramento. 

In  those  years  the  road  had  paid  in  rentals 
alone  $13,600,000 — almost  exacdy  ten  times 
its  value.  For  all  of  which  the  public  has 
paid.  Moreover,  this  rental  was  charged  to 
operating  expenses,  the  public  was  required 
to  make  the  road  profitable  above  such  ex- 
penses,J  and  rates  were  and  are  based  upon 
the  reasonableness  of  such  profits ! 

Subsidiary  properties  gathered  in  with  the 
California  Pacific  included  the  San  Fran- 
cisco and  North  Pacific,  and  the  San  Francisco 
and  Humboldt  Bay  Railroads,  with  a  nominal 
capital  of  $17,200,000;  and  having  these 
roads  in  its  possession,  the  Central  held  San 
Francisco,  and  indeed  all  California,  in  its 
grip,  and  could  charge  what  it  pleased. 

*  Bancroft's  "  History  of  California,"  vol.  vii. 
f  Ibid.,  p.  584. 

t  As  to  the  general  policy  of  these  leases,  see  Pacific  Railroad 
Commission  Report,  p.  113. 


This  was  always  Mr.  Huntington's  idea, 
to  maintain  at  whatever  cost  an  absolute 
monopoly  of  the  traffic;  to  allow  the  public 
no  chance  of  escape;  and  to  control  the  state 
through  the  control  of  the  primal  necessity 
of  transportation.  For  many  years  he  de- 
voted to  this  object  more  attention  than  to 
all  other  objects  together  until  he  was  ob- 
sessed by  it. 

Now  he  looked  out  upon  the  field  and  .saw 
that  his  supremacy  might  be  threatened  from 
two  directions.  On  the  north,  the  Northern 
Pacific  was  slowly  advancing  from  St.  Paul; 
on  the  south,  he  was  menaced  afar  by  the 
Texas  Pacific  and  others.  He  determined  to 
fortify  both  approaches. 

He  saw  that  from  the  south,  where  the  easy 
routes  were,  he  faced  most  danger.  There- 
fore, as  soon  as  the  Central  Pacific  was  com- 
pleted, he  and  his  three  friends  organized  the 
Southern  Pacific  Railroad  to  build  south- 
ward and  seize  the  southern  gate  of  Cali- 
fornia. 

Here  comes  in  once  more  our  old  friend, 
the  Contract  and  Finance  Company. 

The  grand  secret  of  making  fortunes,  Mr. 
Huntington  had  discovered,  was  to  manipu- 
late evidences  of  debt. 

If  you  could  bond  a  railroad  enterprise, 
then  do  its  work  at  extravagant  or  fictitious 
prices,  then  take  its  bonds  in  payment  and 


"FROM     THE    COURTROOM     JUDGE     CURTIS 

WENT  STRAIGHTWAY  TO  HIS  HOTEL  AND 

PUTTHE  MEMORANDA  IN  THE  GRATE." 


61Z 


Hampton's  Magazine 


its  stock  as  a  bonus,  you  had  the  public  in 
debt  to  you  and  could  always  make  the  pub- 
lic pay  interest  on  that  debt,  to  your  own 
great  emolument. 

That  is  what  he  meant  when  he  said  a  few 
years  before  his  death,  "I  made  my  money  by 
going  into  debt" — a  neat  bit  of  word-play, 
since  the  debt  he  went  into  was  always  debt  on 
which  he  contrived  the  public  should  pay  the 
interest  to  him. 

To  this  end,  the  Contract  and  Finance 
Company  was  a  perfect  instrument;  it  was, 
in  fact,  even  now  at  work  in  more  than  one 
direction. 

The  Central  Pacific  owners  had  made  with 
themselves,  as  the  Contract  and  Finance  Com- 
pany, a  most  remarkable  contract  by  which 
the  Contract  and  Finance  Company  under- 
took all  the  Central  Pacific's  repairs  and 
maintenance,  charged  lo  per  cent  profit 
thereon,  and  used  the  Central  Pacific's  tools, 
shops,  and  plants  in  the  work. 

This,  for  a  simple  little  piece  of  money- 
making  by-play,  seems  hard  to  be  excelled. 

Having  the  same  owners,  the  Southern 
Pacific  now  contracted  with  itself  as  the  Con- 
tract and  Finance  Company  for  the  building 
of  the  new  line,  and  again  the  terms  of  ar- 
rangement were  most  peculiar — and  profit- 
al)le. 

For  its  immediate  uses  the  Contract  and 
Finance  Company  received  through  its  own- 
ers cash,  bonds,  coupons,  and  other  valuable 
things  from  the  Central  Pacific's  earnings  and 
treasury,  and  paid  interest  thereon,  some- 
times as  much  as  12  per  cent  a  year.*  It 
repeatedly  raided  the  Central  Pacific's  sink- 
ing fund  or  other  surpluses,  obtaining  once 
$3,000,000  and  once  $5,000,000,  although 
these  funds  did  not  belong  to  the  Central 
Pacific  but  to  the  government  and  the  people 
of  the  United  States. 

With  funds  so  secured  much  railroad  line 
was  built.  On  lines  so  constructed  bonds 
were  issued,  and  stock.  Bonds  and  stock  so 
issued  were  delivered  to  the  Contract  and 
Finance  Company  in  payment  of  construc- 
tion work  done  at  abnormal  prices.  Finally, 
as  assets  of  this  company,  the  bonds  and 
stock  were  distributed  among  its  stockholders, 
who  were  the  four  happy  gentlemen  of  Sacra- 
mento. 

In  other  words,  the  earnings  of  the  Central 
Pacific,  secured  by  charges  upon  the  public, 
built  the  Southern  Pacific,  and  the  Southern 

♦Pacific  Railroad  Commission  Report,  testimony  of  W  E. 
Brown,  p.  2908. 


Pacific  bonds,   stock   and  land   grant   were 
'^velvet!"* 

Not  a  cent  of  the  stock  got  upon  the  mar- 
ket; it  all  went  as  fast  as  the  presses  issued 
it,  into  the  coffers  of  the  Sacramento  four. 
Beautiful! 

WESTERN  DEVELOPMENT  SUCCEEDS  THE  CON- 
TRACT   AND   FINANCE   COMPANY 

The  Contract  and  Finance  Company  did 
not  long  survive  in  these  goodly  matters. 
In  1875,  its  four  owners  took  the  very  un- 
usual step  of  disincorporating  it,  which  en- 
abled its  affairs  to  be  wound  up  and  its 
books  destroyed. 

In  its  stead  was  organized  the  Western 
Development  Company — same  ownership 
(with  the  addition  of  David  D.  Colton)  same 
purposes,!  and  $5,000,000  of  capital,  of  which 
not  a  dollar  was  paid  in. 

It  succeeded  to  the  contracts  of  the  Con- 
tract and  Finance  Company,  including  the 
Southern  Pacific  work.  How  well  it  fared  on 
its  way  through  fertile  fields  we  may  judge 
from  the  fact  that  on  September  4,  1877,  two 
years  after  it  started,  it  distributed  among  its 
happy  stockholders  the  following  assets  it 
had  accumulated  in  its  peculiar  ministra- 
tions: 

Southern  Pacific  slock $13,500,000 

Southern  Pacific  bonds 6,300,000 

Amador  Branch  bonds 675,000 

Berkeley  Branch  bonds 100,000 

Los  Angeles  Branch  bonds i3)500 

Amador  Branch  stock 674,000 

Berkeley  Branch  stock 100,000 

Total  for  this  sitting $21,362,500 

Fair — for  a  day's  work! 

The  contract  with  the  Contract  and  Fi- 
nance Company,  and  later  with  the  Western 
Development  Company,  was  to  construct  and 
equip  the  whole  line  of  railroad  for  $40,000 
a  mile  in  first  mortgage  bonds  "and  the  bal- 
ance in  capital  stock" — whatever  that  might 

*  Pacific  Railroad  Commission  Report,  pp.  2984,  2665,  2678, 
and  particularly  the  testimony  of  Stanford  at  p.  2665  and  of 
C.  F.  Crocker  at  p.  2999. 

t  By  Commissioner  Littler — Is  it  not  true  that  the  Western 
Development  Company  is  an  instrument  by  which  Messrs. 
Stanford.  Huntington,  Crocker,  and  Hopkins  performed  work 
and  furnished  materials  to  the  Central  Paci.fic  Railroad  Com- 
pany and  that  they,  as  ofiRcers  of  the  Central  Pacific  Railroad 
Company,  furnished  the  Western  Development  Company  with 
funds  belonging  to  the  Central  Pacific  Company  and  charged 
a  profit  of  10  per  cent  on  all  work  done  and  materials  furnished, 
which  profit  they  appropriated  to  their  own  use? 

AxswER.  I  do  not  call  that  a  true  statement.  ...  I  do  not 
understand  that  thev  used  the  Western  Development  Company 
as  officers  of  the  Central  Pacific  but  in  their  individual  capacity. 

—  Pacific  Railroad  Commission  Report,  testimony  of  F.  S. 
Douty,  p.  2695.  Quoted  here  also  as  a  specimen  of  the  ideas 
of  business  ethics  that  seemed  to  permeate  this  interesting 
company. 


I 


Winning  an  Empire  and 


the  Cost  of  the  Winning  613 


mean,  since  the  actual  cost  of  construction 
could  not  have  exceeded  $25,000  a  mile  *  for 
most  of  the  distance. 

For  this  the  fat  land  grants  from  the  fed- 
eral government  alone  would  have  more  than 
sufficed,  and  the  rich  donations  from  local 
sources  were  chiefly  additions  to  the  profits 
of  the  four.  The  state  of  California  gave 
thirty  acres  of  land  at  Mission  Bay,  San 
Francisco,  a  very  valuable  endowment.  The 
city  of  San  Francisco  gave  $1,000,000;  other 
cities,  counties,  and  towns  gave  $1,002,000. 

Congress,  at  Mr.  Huntington's  instigation, 
had  bestowed  upon  the  enterprise  half  the 
land  in  a  strip  forty  miles  wide  along  its  entire 
line,  or  12,800  acres  for  everj'  mile  con- 
structed. Much  of  this  land  was  exceedingly 
rich,  but  if  it  were  worth  no  more  than  the 
government's  price  to  settlers,  $2.50  an  acre, 
the  whole  would  have  been  worth  $29,824,000 ; 
while  at  the  excessive  rate  of  $40,000  a  mile, 
the  whole  line  from  San  Francisco  to  the 
southeastern  boundary  of  the  state,  including 
the  branches,  would  have  cost  to  build  only 
$37,000,000. 

This  was  an  arrangement  that  constituted 
a  great  triumph  of  Mr.  Huntington's  ability 
in  the  lobby,  but  it  was  to  have  unlooked-for 
and  bloody  consequences. 

THE    PACIFIC    IMPRON  EMENT   COMPANY 

The  Western  Development  Company 
lasted  three  years,  when  it  followed  the  Con- 
tract and  Finance  Company  into  the  limbo 
of  things  better  forgotten,  and  was  succeeded 
by  the  Pacific  Improvement  Company,  same 
owners  (except  one)  same  purposes,  same 
capital,  same  absence  of  payments  therefore. 
This  company,  inheriting  the  contracts  of 
the  Western  Development  Company,  carried 
the  building  of  the  Southern  Pacific  to  the 
state  boundary  at  the  Colorado  River,  and 
thence  across  Arizona  and  New  Mexico, 
where  had  been  organized  by  the  same  .own- 
ers the  Southern  Pacific  Railroad  Company 
of  Arizona  and  the  Southern  Pacific  Railroad 
Company  of  New  Mexico. 

The  Southern  Pacific  of  Arizona  had  an 
authorized  capital  of  $20,000,000  (none  of 
which  was  paid  in  f)  and  bonds  of  $10,000,- 
000.  The  Southern  Pacific  of  New  Mexico 
had  similarly  a  capital  stock  of  $10,000,000 

*  In  a  region  of  no  greater  difficulties  Receiver  Farley,  of  the 
St.  Paul  and  Pacific,  was  at  this  time  building  and  equipping  a 
railroad  on  Sio.ooo  a  mile.  In  1877,  Jay  Gould  told  Mr.  Hunt- 
ington that  he  was  building  a  branch  of  the  Union  Pacific  at 
$9,500  a  mile. 

t  Pacific  Railroad  Commission  Report,  testimony  of  F.  S. 
Douty,  p.  2708. 


"CONGRESS,    AT    THE    INSTIGATION    OF   MR. 

HUNTINGTON.  BESTOWED   12.800  ACRES 

PER  MILE  ON  THE  RAILROAD." 

(none  of  which  was  paid  in)  and  bonds  of 
$5,000,000. 

The  Pacific  Improvement  Company  built 
for  the  Arizona  road  384.17  miles,  and  for  the 
New  Mexico  road  107.25  miles.  The  con- 
tract called  for  $25,000  a  mile  in  bonds  and 
practically  all  the  stock.* 

When  completed,  the  road  was  leased  by 
its  owners  to  themselves  as  the  Central  Pacific, 
on  extravagant  terms  from  which  the  Central 
Pacific  made  great  profits  and  drove  its  stock 
toward  par. 

The  Southern  Pacific  stock,  secured  for 
nothing  in  this  deal,  is  now  worth  137! .f 

The  Pacific  Improvement  Company  like- 
wise seems  to  have  done  a  prosperous  trade 

*  Pacific  Railroad  Commission  Report,  testimony  of  F.  S. 
Douty,  p.  2708. 

t  These  leases  worked  both  ways  for  their  profit .  "  They 
constructed  1,171  miles  of  adjunct  lines  at  a  cost  of  $27,216,- 
931.01.  On  account  of  that  construction,  in  addition  to  a 
small  cash  payment,  they  issued  bonds  to  themselves  to  the 
amount  of  $.33,722,000.  and  stock  to  the  amount  of  $49,005,800, 
making  a  total  issue  of  $82,727,800,  of  which  $55,531,554  repre- 
sented inflation.  Then  as  directors  of  the  Central  Pacific  tney 
took  leases  of  their  own  lines  for  the  Central  Pacific  for  $3,490,- 
828.81  per  annum,  which  was  at  the  rate  of  nearly  13  per  cent." 
Pacific  Railroad  Commission  Report,  p.  143. 


614 


Hampton's  Magazine 


in  its  line.  At  a  meeting  held  April  1 1,  1882, 
as  shown  by  its  minute  book,  it  distributed 
among  its  stockholders  these  securities  that 
it  had  gathered  in  its  own  sweet  way: 

Southern  Pacific  of  Arizona  stock $19,994,800 

Southern  Pacific  of  Arizona  bonds 2,572,000 

Southern  Pacific  of  New  Mexico  stocks .  6,688,800 

Southern  Pacific  of  N  ew  Mexico  bonds .  4,1 80,000 

Monterey  Railroad  Company  stock ....  284,000 

Monterey  Railroad  Company  bonds. . . .  248,000 

Total  at  this  sitting $33,967,600 

I  find  also  that,  in  1894,  it  transferred  to  the 
land  department  of  the  Central  Pacific  Rail- 
road property  worth  something  like  $20,- 
000,000,  including  more  than  125,000  acres 
of  rich  land  and  125  town  sites  on  the  line 
of  the  Southern  Pacific  of  California.  From 
which  I  infer  that  in  the  midst  of  other  and 
exacting  cares  the  thrifty  owners  had  not 
overlooked  the  profit  that  lies  in  knowing 
where  the  stations  are  to  be  placed  when  you 
lay  out  a  railroad. 

VARIED    SOURCES    OF    WEALTH   AND    POWER 

But  to  return  to  earlier  history.  While  the 
Southern  Pacific  was  reaping  bonds  and 
things  as  it  moved  eastward,  Mr.  Henry 
Villard,  in  control  of  the  Northern  Pacific, 
was  rapidly  pushing  westward.  His  main 
object  was  Portland,  but  men  easily  foresaw 
that  he  would  wish  to  build  a  branch  south- 
ward toward  San  Francisco. 

The  Central  Pacific  undertook  to  check- 
mate him  by  building  north  a  line  called  the 
California  and  Oregon  Railroad  and  by  form- 
ing an  amalgamation  called  the  Northern, 
both  constructed  in  the  same  way  by  the 
Western  Development  Company  or  the  Pa- 
cific Improvement  Company,  on  terms  that 
filled  the  coffers  of  the  four  gentlemen  and 
piled  up  capitalization  and  interest  thereon. 

I  cannot  do  more  than  give  some  bare  idea 
of  these  operations  by  citing  a  few  instances 
from  many,  for  to  relate  all  the  myriad 
sources  of  profit  would  fill  a  great  volume. 
There  was  one  piece  of  road  103  miles  long 
from  Delta,  California,  to  the  state  line,  be- 
longing nominally  to  the  California  and  Ore- 
gon branch  of  the  Central  Pacific's  happy 
family  and  constructed  by  the  Pacific  Im- 
provement Company.  On  this  the  price 
charged  for  construction  was  $4,500,000  in 
bonds  and  50,000  shares  of  stock,  together 
worth  in  the  market  $8,340,000.  The  actual 
cost  of  construction  was  $3,505,609;  the  net 
profit,  representing  also  an  unnecessary  ad- 


dition to  the  debt  load  that  we  must  pay,  was 
$4,834,391. 

To  own  a  construction  company,  a  railroad 
company,  and  a  good  reliable  printing  press, 
is  better  than  to  own  a  mint.  Nothing  can 
limit  your  fortune  but  the  extent  of  your 
greed. 

In  the  same  manner,  these  gentlemen  -or- 
ganized the  South  Pacific  Coast  Railroad 
Company,  with  a  line  eighty  miles  long,  on 
which  the  bonded  indebtedness  was  $5,- 
500,000  and  the  stock  $6,000,000.  The 
bonds  alone  represented  almost  $70,000  a 
mile.  All  of  the  bonds  and  all  of  the  stock 
were  taken  by  the  Pacific  Improvement  Com- 
pany for  building  the  road,  and,  in  1886,  the 
Pacific  Improvement  Company  passed  along 
all  of  these  securities  to  the  Southern  Pacific, 
whose  owners  had  gone  through  the  formality 
of  leasing  their  own  property  to  themselves 
on  an  arrangement  that  left  the  rental  and  the 
interest  on  the  bonds  and  dividends  on  the 
stock  (if  any  dividends  were  paid)  all  to  be 
dug  out  of  the  road  by  means  of  freight  and 
passenger  rates. 

Similar  processes  were  followed  with  the 
Northern  and  with  the  Northern  California. 
The  Northern  was  an  accretion  of  ten  smaller 
roads,  most  of  them  with  overlapping  leases. 
It  managed  to  pile  up  a  stock  issue  of  $9,- 
182,000,  with  bonds  at  the  rate  of  $30,000 
a  mile  for  386  miles,  its  total  mileage.  In  the 
end  this  conglomerate  with  all  its  leases  was 
leased  to  the  Southern  Pacific  and  its  stock 
exchanged  for  Southern  Pacific  stock  in  the 
hands  of  the  toll  taker,  and  the  whole  thing 
dumped  on  us — ^who  pay. 

Year  after  year,  the  interests  of  these  men 
spread  in  many  directions.  They  went  into 
banking,  politics,  legislation,  land-owning, 
navigation,  and  newspapers  and,  with  par- 
ticularly unfortunate  results  to  the  public, 
they  went  into  street  railroads.  They  in- 
creased their  investments  and  power  and 
turned  the  profits  made  from  one  greedy 
enterprise  into  power  to  secure  more  greedy 
enterprises  and  gain  more  profits  and  more 
power. 

Sometimes  they  used  their  power  as  a  ban- 
dit uses  his  pistol  and  sometimes  as  a  confi- 
dence man  uses  his  skill,  yet  on  calm  review 
it  appears  that  at  no  time  were  they  more 
than  the  successful  exponents  of  the  legit- 
imatized spirit  of  their  age,  nor  doing  aught 
that  was  not  sanctioned  by  the  code  of  morals 
the  age  had  accepted. 

Of  their  greater  exploits  we  shall  have  toj 


I  Winning  an  Empire  and 

ak  at  length  hereafter,  but  for  your  re- 
freshing, meanwhile,  here  is  a  little  example 
of  the  bandit  or  highwayman  style  of  busi- 
ness. 

^P  SECURING  THE   WELLS-FARGO  COMPANY 

We  go  back  first  to  the  stagecoach  days. 
When  John  Butterfield's  twenty-one  day 
stage  from  St.  Louis  via  El  Paso  to  San  Fran- 
cisco had  been  well  established,  the  business 
grew  too  great  for  an  individual  and  a  com- 
pany took  charge  of  it.  The  Civil  War  drove 
the  stages  from  the  easy  southern  route  to  a 
road  across  the  center  of  the  country,  be- 
ginning at  Omaha. 

With  this  change  the  company  was  reor- 
ganized, and  under  its  new  name.  Wells, 
Fargo  and  Company,  with  Louis  McLane  of 
New  York  as  its  manager,  soon  became  an 
institution  in  the  West,  operating  a  great  e.x- 
press  and  banking  business  as  well  as  stage- 
coaches. When  the  Central  Pacific  was  com- 
pleted, Wells,  Fargo  and  Company  entered 
into  an  arrangement  to  carry  on  its  express 
operations  over  the  railroad. 

The  next  year,  however,  1870,  the  Wells- 
Fargo  people  were  dismayed  to  learn  that 
Messrs.  Stanford,  Huntington,  Hopkins,  and 
Crocker,  with  Mr.  Lloyd  Tevis,  had  organ- 
ized the  Pacific  Express  Company  and  pur- 
posed to  compete  for  the  express  carrying 
trade.  Competition  with  the  men  that  owned 
the  railroad  and  could  do  what  they  pleased 
with  rates  was  no  competition  at  all,  but 
merely  a  game  of  stand  and  deliver. 

The  Pacific  Express  Company  went  no 
further  than  to  print  some  stationery'  and 
open  an  office,  when  Wells,  Fargo  and  Com- 
pany surrendered.  For  a  gift  of  one  third 
of  the  capital  stock  of  Wells,  Fargo  and  Com- 
pany, the  Pacific  Express  Company  agreed 
to  go  out  of  business. 

One  third  of  the  Wells-Fargo  stock  was 
$3,333,333.33,  thus  acquired  for  the  cost  of  a 
bunch  of  stationery.  This  seems  fairly  good 
business. 

Afterwards  the  new  stockholders  put  up 
one  third  of  $500,000  to  develop  the  banking 
end  of  the  Wells-Fargo  concern.  Still  later, 
$1,250,000  of  Wells-Fargo  stock  was  issued 
to  the  Central  and  Southern  Pacific  *  (Stan- 
ford, Huntington,  Hopkins,  and  Crocker)  in 
return  for  a  new  traffic  arrangement,  and  the 
whole  great  business  of  the  express  company 
passed  into  the  hands  of  the  railroad,  where 

♦  PaciQc  Railroad   Commission   Report,  testimony  of  Lloyd 
Tevis,  p.  3123. 


the  Cost  of  the  Winninof 


015 


it  remained  until  the  beginning  of  the  present 
year. 

These  I  cite  as  examples  of  the  great  profits. 
But  the  thrift  of  the  fortunate  gentlemen  de- 
spised not  the  day  of  small  things,  also. 

They  built  for  $40,000  a  bridge  over  the 
Colorado  River  and,  owning  it  themselves, 
they  leased  it  to  the  Southern  Pacific,  which 
they  controlled,  at  $12,000  a  year,  which  they 
charged  into  the  railroad's  operating  ex- 
penses and  made  a  basis  for  rates. 

They  bought  the  steamer  Solano,  worth 
$100,000,*  and,  owning  it  themselves,  they 
leased  it  to  the  Northern  Railroad,  which 
they  controlled,  at  $90,000  a  year,  and  they 
charged  the  $90,000  into  that  railroad's  oper- 
ation expenses  and  made  it  likewise  a  basis 
for  rates. 

Whenever  they  executed  a  neat  bit  of  graft, 
it  was  always  charged  either  into  capital  or 
into  operating  expenses  or  into  both,  and 
wherever  it  was  charged  there  it  remains,  and 
as  you  will  see  in  another  article,  we  pay 
for  it. 

THIRTY-FOUR   MILLIONS   IN   DIVIDENDS 

All  this  time  at  the  old  original  Central 
Pacific  gateway  the  takings  had  been  goodly 
and  incessant.  As  soon  as  the  cars  began  to 
run  over  the  Sierra  Nevada,  the  surplus  earn- 
ings began  to  accumulate.  At  first  these 
seem  to  have  been  used  to  build  other  lines, 
but  by  September,  1873,  the  business  was  so 
good  that,  in  addition  to  the  money  slipped 
over  to  side  enterprises,  there  was  plainly 
enough  for  a  dividend.  From  that  time  and 
with  the  exceptions  of  1878  and  1879,  the 
dividends  ranged  from  6  to  10  per  cent  a 
year  until  1884. 

Then  the  dividends  stopped.  In  that  year, 
1884,  the  stock  was  worth  80  and  more,  and 
for  the  first  time  its  owners  parted  with  it. 
They  sold  the  bulk  of  their  holdings  to  an 
English  syndicate  under  a  remarkable  ar- 
rangement that  left  the  original  holders  still 
in  control  of  the  property.  After  that  the 
road  ceased  to  be  profitable.  Only  Central 
Pacific  stock  was  sold  to  the  English.  The 
original  holders  retained  their  stock  in  the 
Southern  Pacific,  which  might  now,  of  course, 
be  deemed  to  be  a  rival  line  to  the  Central 
Pacific — from  whose  earnings  it  had  been 
built!  t 

After  ten  years  had  passed  without  divi- 


*  Sworn  statement  of  A.  N.  Towne,  General  Manager  of  the 
Southern  Pacific. 

t  Congressional  Record,  48th  Cong.,  First  Session,  p.  4821. 


The  Gree  Gree  Bush 

By  James  B.  Connolly 

Autlior  of  "Out  of  Gloucester  "  ''The  Wireless  Night  of  Hat- Po  Bay,"  etc. 
Illustrations  by  Maynard  Dixon 


QUEER  how  a  man  kn(x:king  around  the 
world  gets  here  a  hint,  there  a  hint,  of 
a  thing  that  has  been  puzzling  him  for  years, 
and  at  last,  all  of  a  sudden  usually,  finds  he 
has  all  the  missing  threads  straight  and  un- 
tangled in  his  palm.  I  have  in  mind  the 
case  of  Bowles.  Bowles  wasn't  his  right 
name  at  all,  but  we'll  call  him  that,  for  it  was 
under  that  name  he  enlisted  in  the  navy, 
where  they  still  speak  of  him  as  the  "Gree 
Gree  Man."  But  that  enlistment  occurred 
later. 

Bowles  came  of  a  family  up  our  way  that, 
well,  the  newspaper  men — I  had  a  brother  a 
newspaper  man — used  often  to  sit  down  and 
wonder  if  the  Bowleses  really  did  believe 
themselves  so  much  better  than  ordinary  peo- 
ple, or  were  they  just  trying  to  fool  themselves, 
too.  There  is  probably  not  much  going  on 
in  a  city  that  a  dozen  good  police  reporters 
don't  pretty  near  get  to  the  bottom  of — if 
they're  really  interested.  Bowles'  people 
were  great  hypocrites  and  Bowles,  being 
brought  up  to  believe  that  he  was  better  stuff 
than  other  young  fellows,  naturally  broke 
when  the  strain  came. 

Before  he  was  out  of  college  he  had  done  a 
dozen  things  that  another  boy  would  have 
been  put  away  for.  But  one  day  he  just  had 
to  jump  out,  and  in  a  hurry;  and  cut  off  from 
leaving  the  city  by  train  or  steamer,  he  sailed 
on  a  bark  that  was  bound  for  the  West  Coast 
of  Africa,  on  one  of  a  line  of  old  hookers  that 
used  to  sail  more  or  less  regularly  for  the 
West  Coast,  going  out  with  a  small  holdful — 
rum,  striped  cahco,  brass  wire,  and  so  on, 
missionaries  sometimes — and  coming  back 
with  a  big  holdful  of  ivory,  palm  oil,  pepper, 
and  things  like  that.  A  nice,  quiet  business 
that  used  to  pay  about  a  thousand  per  cent 
one  time.  Perhaps  it  does  yet.  And  it  was  a 
great  relief  to  all  the  Bowleses  when  young 
Bowles  got  away  without  getting  caught,  and 
they  didn't  care  how  long  he  stayed  away. 

What  I  am  about  to  say  now  of  Bowles' 


doings  on  the  West  Coast  is  the  summing  up 
of  what  I  learned  at  different  times  from  a 
dozen  people — a  couple  of  ship  captains,  a 
bosun's  mate  in  the  navy,  a  dozen  sailormen,  I 
stokers,  and  so  on,  who  happened  to  be  on  the  * 
West  Coast  when  Bowles  was  there.  Out 
there  Bowles  fell  in  with  old  Chief  Thomson, 
who  used  to  run  things  pretty  much  to  suit 
himself  over  a  country  larger  than  many  a 
European  nation  controlled. 

Thomson  was  a  name  the  white  traders  I 
gave  him.  It  may  have  been  that  Bowles,  * 
though  Kipp  was  the  name  he  took  out  there, 
possibly  Bowles,  coming  of  a  hard-fibered 
trading  ancestry,  showed  the  old  fellow  a 
few  new  commercial  tricks.  He  must  have 
been  of  some  material  use,  for  old  Chief  was 
too  shrewd  and  Bowles  too  cold-blooded  for 
anybody  to  suspect  it  was  a  matter  of  senti- 
ment. So  fat  and  wide  that  he  had  to  swing 
his  legs  sideways  like  a  duck  when  he  walked 
— that  was  old  Chief,  but  respected  by  all 
the  white  people,  even  though  he  was  as 
complete  an  old  villain  as  ever  lived  in  some 
ways,  for  he  had  force,  and  he  was  a  man  who 
meant  well  by  his  own  people;  that  is,  after 
he'd  had  his  fill  of  eating,  drinking,  and 
general  pleasuring. 

Old  Chief  was  at  the  head  of  half  a  dozen 
secret  societies — at  least  half  a  dozen.  Africa 
is  rotten  with  secret  societies,  worse  than  any 
white  country.  Among  white  peoples,  of 
course,  those  who  want  political  office  or  a 
good  grocery  trade — that  kind  are  the  great 
"joiners";  but  down  there  it  was  the  cere- 
monies that  attracted  them  as  much  as  any- 
thing. In  places  there  they  still  practice  some 
of  the  things  they  used  to  do  ages  ago.  It  is 
hard  to  make  people  believe  this,  although  in 
our  own  country  the  negroes  still  practice 
voodooism,  and  in  Jamaica  and  Hayti  they 
still  practice  Obeaism.  One  society,  how- 
ever, old  Chief  Thomson  made  little  secret  of 
— Africa  for  the  Africans  was  what  it  meant. 

And  by  an  African  he  meant  a  black,  and 


6i8 


I 


Scientific  Corruption  of  Politics 

MR.  HUNTINGTON'S   DEALINGS  WITH   MEMBERS   OF  CONGRESS   IN    FURTHERING 
THE    DESIRES   OF   THE   SOUTHERN    PACIFIC   RAILROAD 

By  Charles  Edward  Russell 

Author  of  "The  Heart  of  the  Railroad  Problem,"  "Beating  Men  to  Make  Them  Good,"  etc. 
Portraits  by  S.  G.  Cahan 

In  the  White  House  one  Jay : 

Mr.  C.  P.  Huntington — Mr.  President,  when  you  called  on  me  in  New  York  for  a  sub- 
scription for  the  campaign  there  did  I  not  draw  my  check  to  you  for  $  1 00,000  ? 

The  President  of  the  United  States — You  did,  Mr.  Huntington. 

Mr.  Huntington — Then  am  I  not  entitled  to  the  appointment  I  asked  of  you  ? 

The  President  of  the  United  States — You  are,  Mr.  Huntington,  and  you  shall  have  it. 


UNLUCKILY  this  dialogue  is  not  a  bit  of 
imagination  nor  an  excerpt  from  fic- 
tion, but  part  of  an  actual  conversation. 
I  have  no  doubt  many  other  similar  con- 
versations have  occurred  at  the  White  House 
and  elsewhere.  This  is  the  only  one  I  have 
been  able  to  verify.  It  is  verified  by  the  man 
that  heard  it. 

Suppose  the  appointment  Mr.  Huntington 
desired  to  have  been  to  a  federal  judgeship. 
Suppose  the  man  he  chose  for  the  place  to 
have  been  one  of  his  attorneys  and  hench- 
men. Suppose  an  issue  between  the  people 
and  the  railroad  to  come  before  this  judge. 

Toward  which  side  would  you  expect  the 
judge  to  incline? 

And  then  you  are  to  understand  that  al- 
though this  instance  of  compulsive  power 
over  the  government  of  the  nation  seems  very 
startling  and  abnormal,  it  was  of  small  mo- 
ment compared  with  the  total  power  to  which 
the  railroad  company  attained. 

Beginning  in  1862,  when  Leland  Stanford 
was  elected  Governor  of 
California,  the  railroad 
monopoly  upon  new  lines 
steadily  developed  what  in 
the  end  became  incompa- 
rably the  greatest  political 
machine  ever  known. 

We  shall  say  far  too 
little  if  we  merely  say 
that  this  machine  domi- 
nated the  government  of 


As  to  the  specific  cause  of  the  increased 
cost  of  living  President  Taft  to-day  frankly 
told  various  of  his  callers  that  he  was  unable 
to  account  for  it. —  News  dispatch  from 
Washington,  December  30,  ipog. 

They  increased  the  cost  of  living.  .  . 
They  charged  all  that  the  traffic  would  bear 
and  appropriated  a  share  of  the  profits  of 
every  industry  by  charging  the  greater  part 
of  the  difference  between  the  actual  cost  of 
production  and  the  price  of  the  article  in 
the  market. — Pacific  Railroad  Commission 
Report,  p.  141. 


843 


California.  It  was  the  government  and 
all  the  branches  thereof,  not  merely  di- 
recting but  performing. 

Discerning  men  that  wished  to  have  a  bill 
passed,  a  bill  signed,  an  appointment  made, 
a  plan  adopted,  wasted  no  time  with  the  pup- 
pets that  nominally  held  oflBce.  They  went 
directly  to  Mr.  Stanford  or  Mr.  Huntington 
and  asked  for  what  they  wanted.  This  was 
the  custom  even  when  the  thing  wanted  had 
nothing  to  do  with  any  railroad  interest, 
when  it  might  be  something  philanthropic  or 
for  the  public  good. 

The  real  capitol  of  the  state  was  moved  from 
Sacramento  into  the  office  of  the  Central  Pa- 
cific in  San  Francisco.  There  public  policies 
were  shaped,  public  questions  decided,  public 
appointments  determined;  not  merely  for  the 
state,  but  often  for  towns  and  counties  and 
occasionally,  in  a  historic  way,  for  the  nation. 
The  political  organization  that  achieved 
these  stupendous  results  in  politics  came  to 
be  an  overshadowing  influence  in  social  and 
business  affairs  also.  For 
most  young  men  that  cher- 
ished any  ambition  it  held 
the  future  in  its  grasp;  it 
could  make  or  unmake. 

If  a  young  man  wished  to 
distinguish  himself  in  poli- 
tics or  in  a  public  career,  he 
had  no  chance  except  by 
close  alliance  with  the  rail- 
road company ;  if  he  sought 


844 


Hampton's  Magazine 


any  nomination,  he  must  seek  it  through  the 
company's  agents. 

If  he  was  a  lawyer,  the  railroad  company 
could  make  him  distinguished  and  successful, 
or  it  could  deprive  him  of  clients  and  make 
him  a  failure.  If  he  wished  to  be  a  judge, 
the  railroad  company  chose  the  judges;  he 
must  apply  through  the  company. 

If  the  young  man  was  in  business,  the  com- 
pany could  make  him  prosperous  or  it  could 
ruin  him. 

If  he  published  or  edited  a  newspaper  or  a 
magazine,  he  could  obtain  subsidies  from  the 
railroad  company;  or  risk  bankruptcy  if  he 
had  its  ill-will. 

The  very  position  in  society  of  his  wife  and 
therefore  her  comfort  and  peace  of  mind,  his 
own  standing  in  the  community,  the  position 
and  to  some  extent  the  opportunities  of  his 
children  came  to  depend  chiefly  and  some- 
times wholly  upon  his  attitude  toward  this 
truly  imperial  power  that  had  seized  the 
State  of  California.* 

NEWSPAPERS     AND     CHURCHES     SUBJECT     TO 
SOUTHERN   PACIFIC   INFLUENCE 

This  power  controlled  also  most  of  the 
channels  of  public  opinion.  Some  newspa- 
pers and  magazines  it  owned  outright  and 
published  in  its  interest;  hundreds  of  others 
it  controlled  through  subsidies,  the  secret 
pay  roll,  advertising,  and  passes.  Very  well 
known  newspapers  and  famous  editors  were 
regularly  paid  for  their  influence;  one  editor 
was  hired  at  $10,000  a  year  merely  to  write 
and  to  publish  eulogies  of  Mr.  Stanford. 

This  power  went  into  the  church  also  and 
into  the  schools.  It  secured  the  assistance  of 
clergymen,  educators,  and  historians. 

Many  a  clergyman  with  an  annual  pass  in 
his  pocket  went  about  speaking  well  of  the 
railroad  and  of  the  four  men  of  Sacramento. 
If  the  pass  were  insufiicient  to  get  him,  why, 
there  was  always  the  liberal  subscription  to 
the  church  charity.  Church  societies  were 
not  forgotten,  nor  Sunday  schools.  One  de- 
nomination organized  a  league  with  branches 
all  about  the  state.  Almost  at  once  this 
league  was  controlled  by  men  favorable  to 
the  railroad  company. 

No  trick  escaped  the  vigilance  that  steered 
the  machine  and  had  no  partisan  preference 
in  politics,  no  denomination  in  religion,  but, 

*  They  exerted  a  terrorism  over  merchants  and  over  communi- 
ties, thus  interfering  with  the  lawful  pursuits  of  the  people. '  They 
participated  in  election  contests.  By  secret  cuts  and  rapid 
fluctuations  they  menaced  business,  paralyzed  capital  and  re- 
tarded investment  and  development. — Pacific  Railroad  Com- 
mission Report,  p.  141. 


worked  and  plotted  and  mined  without  ceas- 
ing to  augment  and  maintain  colossal  Power. 

All  these  and  still  other  influences  were 
like  strings  attached  to  many  puppets,  and 
all  the  strings  led  into  the  office  of  the  railroad 
company.  With  one  pull  upon  the  strings 
the  many  puppets  were  set  dancing. 

A  great  part  of  their  dancing  was  designed 
to  conceal  the  real  movements  of  the  com- 
pany, to  make  deviltry  appear  plausible,  or 
to  prevent  the  people  at  large  from  seeing 
that  popular  government  had  been  abolished. 

After  a  time  a  condition  resulted  in  which 
the  railroad  company  could  not  undertake  an 
act  so  injurious  that  great  numbers  of  respect- 
able men  would  not  applaud  and  support  it; 
and  the  public  became  calloused  to  charges  of 
wholesale  corruption  that  were  opposed  or 
refuted  from  so  many  eminent  sources. 

After  a  time,  too,  there  grew  up  a  condition 
in  whichneither  any  laws  norconstitutions,  nor 
any  kind  of  public  revolt  nor  public  protest, 
nor  the  nation,  nor  contracts,  nor  pledges,  nor 
guaranteed  rights,  nor  any  consideration  of 
morals,  nor  any  other  creature,  seemed  to  avail 
against  this  Power  that  year  after  year  defied 
every  attempt  to  restrain  it,  until  men  lost 
heart  and  settled  into  sullen  submission  un- 
der a  tyranny  they  could  not  throw  off. 

Periodically  there  had  been  angry  revolt 
when  the  people  attempted  to  regain  their 
government ;  anti-railroad  conventions  had 
been  held,  good  and  honest  men  nominated 
and  elected  to  office.  Every  such  rebellion 
had  ended  in  the  same  abject  failure. 

The  good  men  elected  to  office  found  them- 
selves utterly  unable  to  combat  a  system  so 
vast  and  so  marvelously  buttressed.  With  the 
best  of  intentions  and  the  most  resolute  will 
they  were  alwa^'s  defeated  and  helpless. 

The  state  courts  had  stood  by  the  com- 
pany; or  if  these  courts,  too,  happened  to  be 
captured  temporarily  by  the  people,  then  the 
company  (which  was  interstate)  resorted  to 
the  federal  courts  and  thence  invariably  re- 
turned triumphant,  so  that  no  essential  con- 
dition was  changed.  In  a  few  months  the 
people  relapsed  into  their  lethargy  and  the 
company  regained  the  full  measure  of  its 
political  ascendency. 

It  could  do  as  it  pleased,  this  company; 
the  state  had  created  it,  and  now  it  had  dis- 
placed its  creator.  It  could  do  as  it  pleased 
and  levy  upon  the  people  practically  unlim- 
ited tribute.  It  had  the  power  to  make  trans- 
portation rates  and  through  these  rates  it 
caused  the  people  to  pay  for  every  cent  ex- 


Scientific   Corruption  of  Politics 


845 


pended  by  its  political  machine.  Every  sub- 
sidy, every  "legal  expense,"  every  dollar 
paid  for  "explaining  things,"  every  charity 
subscription,  every  hired  legislative  agent, 
every  county  boss,  every  phase  of  the  vast 
organization,  was 
charged  against 
the  people  and 
taken  from  them 
in  transportation 
rates  not  once,  but 
many  times. 

The  people  paid 
for  their  own  un- 
doing. 

They  paid  for  it 
then,  they  pay  for 
it  now,  they  will 
continue  to  pay  for 
it  more  and  more 
in  cash  taken  out 
of  their  earnmgs 
and  expressed  in 
the  increased  cost 
of  living. 

This  great  po- 
litical machine  was 
much  more  ef- 
ficient than  Tam- 
many's or  any 
other  machine  that 
ever  existed,  be- 
cause it  was  non- 
partisan; it  domi- 
nated the  Demo- 
cratic organization 
as  easily  as  the  Re- 
publican. Politi- 
cal manipulation  it 
reduced  coldly  to 
the  exact  principles  of  science  and  business. 
It  made  politics  a  matter  of  scientific  corrup- 
tion and  perfect  organization,  and  by  these 
means  it  secured  astonishing  results. 

In  every  county  in  California  the  railroad 
company  maintained  an  expert  political  man- 
ager whose  employment  was  to  see  that  the 
right  men  (for  the  railroad  company)  were 
chosen  as  convention  delegates,  the  right  kind 
of  candidates  named  and  elected,  and  the 
right  things  done  by  men  in  office. 

Often  this  manager  would  be  the  Repub- 
lican boss  of  a  Republican  county,  or  the 
Democratic  boss  of  a  Democratic  county.  In 
important  or  doubtful  counties  he  would  be 
merely  the  railroad  boss  with  whom  the  Re- 
publican boss  and  the  Democratic  boss  must 


COLLIS  POTTER   HUNTINGTON   IN   HIS  PRIME 
1862    UNTIL    1896    UNDOUBTEDLY    THE 
GREATEST  RAILROAD  GENIUS 
OF    HIS  TIMES. 


deal  for  money,  votes,  and  success.     Under 
him  he    had   as   many  subordinates   as   he 
needed  to  care  perfectly  for  the  wards  and 
rural  districts,  and  through  these  assistants 
he  watched,  reported,  and  forestalled  any  at- 
tempt to  defeat  or 
evade  the  system. 
At  the  head  of 
this   vast    depart- 
ment was  always 
a  man  of  peculiar 
gifts    known    for- 
mally as  the  rail- 
road   company's 
General   Solicitor, 
but  by  the  cynical 
part  of  the  public 
called  by  a  name 
far  more  expressive 
if  less  euphonious. 
He  had  a  staff  of 
well  -  drilled    and 
able  assistants;  to 
each  of  these  a  sub- 
department  was  as- 
signed. One  looked 
after  the  Nevada 
legislature,   one 
cared  for  Utah,  one 
for    Arizona,    one 
for  New  Mexico, 
one  for  local  poli- 
tics in  San  Fran- 
cisco.    Each    had 
his  own  corps  of 
assistants  and  am- 
ple funds  to  buy 
such     public     of- 
ficers as  he  might 
need. 
With  such  an  organization,  so  supplied 
with  money,  and  so  defended  by  respecta- 
bility, the  railroad  company  could  select  its 
own   United   States    senators,   members   of 
Congress,   County   Supervisors,   and   every- 
thing between. 

The  money  cost,  of  course,  was  great;  but 
as  the  cost  was  saddled  directly  upon  the 
people,  this  was  not  a  matter  of  importance 
to  the  company.  It  was  equipped  with  funds 
to  buy  whatever  was  needed,  and  it  had 
very  active  support  in  ways  and  from  men 
that  cost  little  or  nothing.  This  at  first  seems 
strange,  but  on  reflection  will  be  found  to  be 
true  and  to  represent  a  universal  condition 
in  this  country.  The  railroad  company 
took  and  still  takes  advantage  of  the  follow- 


FROM 


846 


Hampton's  Magazine 


JOHN    H.    MITCHELL.    SENATOR   FROM   OREGON 
IN   1877. 

ing  elements  that  exist  in  every  commu- 
nity: 

1.  Men  that  can  be  fooled  by  party  loyalty. 

2.  Men  that  are  eager  for  political  careers 
and  know  there  is  no  chance  except  by  serv- 
ing the  money  power. 

3.  Merchants  that  can  be  controlled 
through  their  banks,  or  terrorized,*  or  brought 
into  line  with  rebates. 

4.  Men  that  believe  the  railroad  company 
and  all  great  corporations  to  be  part  of  "our 
set"  and  feel  a  class-conscious  satisfaction 
in  allying  themselves  against  the  riffrafiF  and 
the  ignorant  rabble  "  envious  of  us  of  the 
better  orders." 

5.  Men  that  are  fooled  by  the  purchased 
press. 

6.  Men  that  can  be  had  for  a  pass  or  two. 
Beyond  these  remains  the  class  that  must 

be  secured  with  money,  including  bosses, 
heelers,  professional  politicians,  repeaters, 
colonizers,  floaters,  lodging-house  keepers, 
the  keepers  of  dives  and  disorderly  houses 
that  cannot  be  controlled  through  the  police, 
the  saloon  keepers  that  cannot  be  controlled 
through  the  breweries. 

All  of  these  were  fully  utilized  by  the 
political  department  and  secured  for  the  rail- 

*  Pacific  Railroad  Commission  Report,  p.  141. 


road  company  the  control  of  the  state  legis- 
lature. 

THE   POLITICIANS'    SCALE   OF    PRICES 

Expenses,  of  course,  did  not  end  when  the 
state  officers  were  chosen.  Many  senators 
and  representatives  worked  on  the  basis  of  a 
regular  salary  of  $5,000  merely  to  kill  all  bills 
that  the  company  wished  to  have  killed,  but 
with  the  proviso  that  for  passing  bills  the 
company  wished  to  have  passed  there  must 
be  extra  compensation. 

All  United  States  senatorships  were  also 
outside  of  the  regular  price,  and  charged  as 
extras.  To  elect  a  senator  for  the  full  term, 
the  regular  price  was  $3,000  a  vote;  for  terms 
of  four  years  or  t%vo  years,  discounts  were 
made  from  this  tariff. 

Besides,  there  were  local  bosses  to  be 
paid  and  their  rates  were  sometimes  un- 
reasonable. Thus  Abe  Ruef,  the  convicted 
boss  of  San  Francisco,  told  Detective  Burns 
that  William  F.  Herrin,  the  present  po- 
litical manager  for  the  Southern  Pacific, 
paid  him  $14,000  for  the  control  of  the 
San  Francisco  county  delegation  to  the 
Republican  State  Convention  of  1906,  which 
was  rather  a  high  price;  and  on  special 
occasions  the  prices  of  senatorships  and  other 
offices  have  been  suddenly  advanced  in  a 
way  that  would  be  very  annoying  to  the  rail- 
road company  if  it  were  not  able  to  charge 
the  price  to  the  public. 

About  all  this  let  no  one  think  there  is 
surmise  or  inference;  least  of  all  is  there 
any  exaggeration.  We  are  dealing  with  an 
inside  view  of  the  situation  furnished  chiefly 
by  one  that  was  long  of  the  railroad's  political 
department,  a  high  executive  that  for  years 
beheld  and  was  a  part  of  every  movement  in 
the  game.  This  man,  James  W.  Rea,  of 
San  Jose,  personally  honest  in  spite  of  his 
employment,  has  made  an  explicit  and  de- 
tailed statement  concerning  all  of  these  con- 
ditions.* The  railroad  company  has  had  am- 
ple opportunity  to  deny  what  Mr.  Rea  has 
averred  on  his  own  knowledge  and  from  his 
own  long  experience,  and  the  railroad  com- 
pany has  not  challenged  one  word  of  his 
story.  So,  then,  even  if  it  were  not  sup- 
ported in  a  thousand  ways  by  ten  thousand 
facts  and  witnesses,  fair-minded  men  would 
say  that  here  must  be  the  plain,  unpleasant 
truth. 

Yet  all  this  time  we  are  to  bear  in  mind 
that  this  monstrous  and  corrupt  machine  was 

♦San  Frandsco  Call,  July  4,  1908. 


I 


Scientific  Corruption  of  Politics 


847 


not  deliberately  designed  by  the  four  men  of 
Sacramento  nor  at  first  desired  by  them,  not- 
withstanding the  unequaled  power  that  it 
conferred.  In  truth  it  was  at  first  forced 
upon  them  by  conditions  and  then  grew  be- 
cause of  other  conditions  and  not  because  of 
any  man's  depravity.  Many  causes  com- 
bined, as  in  human  affairs  many  causes  al- 
ways do  combine,  to  press  them  irresistibly 
along  the  one  course. 

They  were  themselves  the  victims  of  con- 
ditions. 

There  was,  first,  Stanford's  natural  apti- 
tude for  politics  and  political  maneuvering, 
and  his  election  as  the  first  Republican  gov- 
ernor of  California ;  but  there  were  also  many 
other  and  greater  influences. 

From  the  beginning,  the  whole  enterprise 
was  involved  in  politics  because  of  the  grants 
and  subsidies  that  were  sought  from  cities, 
counties,  and  the  state. 

Then,  it  needed  much  ^egislation  for  vari- 
ous purposes,  and  it  began  to  face  many 
harassing  lawsuits  growing  out  of  its  peculiar 
and  illegal  tricks  of  management.  The  easy 
way  to  get  the  laws  it  needed,  to  kill  laws 
that  interfered  with  it,  and  to  win  the  control 
of  the  courts,  was  through  political  action. 
As  to  the  kind  of  action,  there  was  always 
the  example  of  Mr.  Huntington's  brilliant 
success  with  Congress.  Men  would  hardly 
be  flesh  and  blood  if  they  were  not  impressed 
with  that. 

THE    "big    four's"    TASTE   IN    STOCKS 

Of  the  original  supporters  of  Engineer 
Judah's  railroad  project  were  four  stockhold- 
ers that  had  not  been  frightened  out  of  the 
enterprise  by  Mr.  Huntington's  threat  of 
"buy,  sell,  or  the  work  stops."  These  were 
Samuel  Brannan,  the  two  Lambards,  of 
Sacramento,  and  John  R.  Robinson.  After 
the  completion  of  the  road  all  men  saw  that 
its  business  was  enormous  and  its  profits 
must  be  great,  but  for  some  years  there  were 
either  no  dividends  or  the  dividends  were 
disproportionate  to  the  earnings.  Brannan, 
the  Lambards,  and  Robinson  therefore 
brought  suits  against  Stanford,  Huntington, 
Hopkins,  and  Crocker  for  an  accounting  of 
profits  alleged  to  have  been  diverted. 

These  suits  had  a  very  peculiar  history. 
In  all  of  them  the  allegations  shown  by  the 
bills  of  complaint  were  of  most  outrageous 
fraud.  Thus  the  bill  in  the  Robinson  case, 
a  digest  of  which  I  have  before  me,  alleges 
that  neither  Stanford,  Huntington,  Hopkins, 


WILLIAM    M.    STEWART.   SENATOR   FROM 
NEVADA  IN  1877, 

nor  Crocker  ever  paid  a  cent  for  their  stock  ;* 
that  the  only  stock  ever  paid  for  was  that  held 
by  Robinson,  the  Lambards,  Brannan, 
and  the  counties  of  San  Francisco,  Placer, 
and  Sacramento;  that  these  counties  had 
bought  stock  as  subsidies  and  that  Stanford, 
Huntington,  Hopkins,  and  Crocker  subse- 
quently repurchased  this  stock  out  of  the 
earnings  of  the  road;  that  after  these  four 
men  had  seized  control  of  the  road  they  never 
held  a  stockholders'  meeting,  never  paid  for 
their  stock,  and  appropriated  for  their  own 
use  $15,000,000  worth  of  real  estate  granted 
to  the  road  for  terminals  by  the  city  of  San 
Francisco,  the  city  of  Sacramento,  and  the 
State  of  Nevada. 

The  bill  recites  the  huge  gifts  received 
from  the  United  States,  from  the  State  of 
California  and  the  various  counties,  and 
then  declares  the  actual  cost  of  building  f  the 
road  to  have  been  as  follows: 

*  This  allegation  should  be  compared  with  the  finding  of  the 
minority  report  of  the  Pacific  Railroad  Commission,  which  at 
page  9  charges  Leland  Stanford  with  swearing  on  September  18, 
1871,  that  854,283,190  of  Central  Pacific  stock  had  been  paid 
in,  whereas  the  paid  in  stock  was  only  $760,000.  This  is  desig- 
nated in  the  report  as  one  of  the  false  statements  under  oath  con- 
tained in  affidavits  now  on  file  in  the  Interior  Department  at 
Washington. 

t  It  is  interesting  to  compare  these  statements  with  certain 
testimony  given  before  the  Pacific  Railroad  Commission.  For 
instance,  take  the  charge  made  for  building  from  the  eastern  base 
of  the  Sierras  across  the  plains.  This  was,  as  above  stated,  at 
the  foothill  rate,  $32,000,  although  the  act  provided  that  on 
ordinary  or  nearly  level  ground  the  rate  should  be  only  $16,000 


848 


Hampton's  Magazine 


For  the  first  i8  miles $11,500  a  mile 

For   the   next    150   miles   less 

than 42,000  a  mile 

For  the  remainder  of  the  road 
to  the  six  hundred  and  nine- 
tieth mile  less  than 21,000  a  mile 

On  this  the  four  men  of  Sacramento  drew 
from  the  federal  government  $16,000  a  mile 
for  the  first  seven  miles,  $48,000  a  mile  for  the 
next  150  miles,  and  $32,000  a  mile  for  the  rest 
of  the  distance. 

If  the  road  had  been  built  at  actual  cost, 
the  entire  charge  for  construction  and  equip- 
ment would  have  been  $19,212,960  as  against 
the  $55,000,000  and  more  charged  by  the 
Contract  and  Finance  Company — v^^hich  was 
another  name  for  Stanford,  Huntington,  Hop- 
kins, and  Crocker. 

The  bill  also  alleged  that  of  the  first  mort- 
gage bond  issue  of  $27,500,000  these  men  had 
seized  $22,000,000  for  themselves,  and  that 
great  sums  of  money  that  rightfully  should 
have  been  available  for  dividends  had  been 
diverted  and  withheld. 

In  spite  of  the  grave  nature  of  these 
charges  against  their  personal  honor,  the 
men  implicated  did  not  allow  the  cases  to 
come  to  trial  where  they  could  prove  their 
innocence.*  On  the  contrary,  they  compro- 
mised each  suit  by  buying  the  stock  held  by 
the  complainant.  For  some  of  this  stock 
the  price  paid  was  $400  a  share,  for  some 
$500,  and  for  some  $1,700. 

As  the  highest  estimate  of  the  real  market 
value  of  the  stock  was  at  this  time  about  60, 
it  will  be  seen  that  the  gentlemen  had  luxuri- 
ous taste  in  such  things. 

It  appears  also  from  certain  testimony  and 
may  be  noted  as  of  interest  that  the  attorneys 
that  brought  the  suits,  Alfred  A.  Cohen,  De- 
los  Lake,  and  John  B.  Felton,  subsequent- 
ly passed  into  the  employ  of  the  railroad 
company  and  remained  there  until  they 
died.f 

These  and  many  other  significant  incidents, 
the  growing  unrest  in  the  state,  the  bitter 
complaints  of  shippers  and  merchants,  the 

a  mile.  At  page  3662  of  the  testimony,  Mr.  CharleS  Crocker 
being  on  the  stand,  I  find  this: 

Question — Is  it  not  a  fact  that  four  fifths  of  the  distance  be- 
tween Reno  and  Promontory  Point  [525  miles]  consists  of  easy, 
rolling  land,  where  there  was  no  special  difficulty  of  construction? 

Answer — Yes. 

This  means  that  for  these  420  miles  Messrs.  Stanford,  Hunt- 
ington, Hopkins  and  Crocker  charged  the  Government  $13,440,- 
000;  whereas  they  should  have  charged  but  $6,720,000.  The 
charge  to  the  Government  more  than  sufficed  to  build  these  420 
miles  and  left  $3,000,000  in  the  hands  of  the  Big  Four  besides 
the  land  grant,  their  own  bonds  at  $32,000  a  mile  and  all  tlie 
stock  that  they  issued. 

The  equal  of  this  operation  has  not  been  known  in  the  history 
of  niilrond  building. 

*  Pacific  Railroad  Commission  Report,  p.  2779. 

t  Ibid.,  pp.  2775,  2776,  2779,  2831,  3653- 


feeling  plainly  expressed  that  the  railroad 
monopoly  was  a  menace  to  the  public,  indi- 
cated the  necessity  of  controlling  public  func- 
tions and  building  a  political  institution.  In 
plain  terms,  if  the  power  of  the  government 
were  not  seized  the  people  were  practically 
certain  to  inflict  vast  injuries  upon,  or  per- 
haps destroy,  the  profits  that  these  four  saw 
looming  ahead  of  them.  From  one  point  of 
view  political  control  was  a  matter  of  self- 
preservation;  later,  of  course,  it  became  a 
matter  of  enormous  advantage,  but  at  first 
it  was  only  a  necessity. 

POLITICAL  CONTROL  A  MATTER  OF  NECESSITY 

If  there  had  been  nothing  else,  the  relations 
of  these  four  men  to  the  federal  government 
would  have  driven  them  inevitably  into  poli- 
tics. The  $27,500,000  of  government  bonds 
issued  in  their  behalf  were  a  lien  on  their 
property  and  they  were  obligated  to  pay  the 
annual  interest.  Their  purpose  was  to  de- 
fault on  these  interest  payments  for  the  pres- 
ent and  eventually  to  evade  the  payment 
of  principal  and  interest.  Their  only  chance 
to  succeed  in  any  such  scheme  was  to  become 
a  great  political  power,  and  first  of  all  to  own 
the  State  of  California  and  wield  it  as  a  solid 
block  in  Congress  and  in  the  national  con- 
ventions. 

There  was  also  to  be  considered  the  chance 
of  enormous  profits  that  lay  in  getting  from 
Congress  more  rich  grants  from  the  public 
domain  for  their  various  plans  of  railroad 
extension,  because  in  one  such  grant  would 
lie  a  return  greater  than  the  entire  cost  of 
political  control,  including  the  expenses  of 
"explaining"  many  things  to  many  public 
men;  and  there  must  have  been  something 
very  alluring  in  the  idea  of  defraying  by  pub- 
lic grants  the  cost  of  heading  off  competition 
and  maintaining  the  traffic  monopoly  of  the 
West. 

The  wonderful  career  of  Mr.  Huntingtort 
in  Washington  showed  the  way  by  which 
these  things  could  be  done.  He  had  laid  the 
cornerstone  of  the  enterprise  in  political 
manipulation  and  the  illicit  control  of  public 
officers.  Ikit  for  his  achievements  with  Con- 
gress there  would  have  been  no  colossal  for- 
tunes for  him  and  his  associates,  and  without 
the  like  achievements  in  Sacramento  and 
Washington  no  more  millions  could  be  added 
to  these  fortunes  even  if  still  greater  disasters 
did  not  occur. 

Governor  Stanford  at  all  times,  Mr.  Crock- 
er much   of   the   time,    and   Mr.    Hopkins 


^K                                 Scientific  Corruption  of  Politics  849 

some  of  the  time,  looked  out  for  Sacramento,  railroad  and  son  of  the  original  contractor, 

I  shall  recite  now  some  of  the  strange  ex-  some  explanation  of  these  and  cognate  mys- 

penditures  they  made.     In  some  cases  these  teries.    I  will  give  a  specimen  of  Mr.  Crocker's 

were  charged  up  to  ''expense,"  in  some  to  examination.     He  was  asked: 

"legal  expenses";  in  all  cases  they  were  with-  "What  was  the  nature  of  these  payments?" 

out  explanation.*     You  are  to  understand  To   which    he   answered   lucidly:  "They 

that  I  am  quoting  from  an  incomplete  list,  were  general  in  their  character." 

coveringonly  afew  of  theyears:  On  being  pressed  for  a  more  specific  defi- 

i8-c  nition  he  said  that  they  were  "expenses  for 

Dec.  31.    Leland  Stanford $171,781.89  various  purposes."     Being  again  pressed  to 

^p  Dec.  31.     Leland  Stanford 8,877.15  \yQ  explicit    he  said* 

18-6  omcers  of  the  company]  might  consider  ad- 

Feb.  6.    Western  Development  Com-  vantageous  to  the  company  and  which  re- 

pany 26,000  00  quired  the  expenditure  of  money." 

Feb.  8.     Leland  Stanford 20,000 .00 

Feb.  17.     Leland  Stanford 20,000.00  Question — Do  you  know,  directly  or  indirectly,  of 

July  30  to  Sept.   30,  1877.     Leland  the  expenditure  of  any  money  on  account  of  the 

Stanford 83,418.09  Central  Pacific  Railroad  Company  for  the  purpose 

Aug.  30.     D.  D.  Colton ...        1,000.00  of  influencing  legislation? 

Sept.  22.      Western      Development  Mr.  Cohen  (attorney  for  company  and  the  same 

Company 50,000.00  Cohen  that  brought  the  Robinson  suit). — I  advise 

Sept.  22.      Western      Development  you  not  to  answer  that  question. 

Company 29,974. 13  Witness. — By  advice  of  counsel  I  decline  to  an- 

Nov.  2.     D.  D.  Colton 7,500.00  swer  that  question.* 

'^Sept.  7.    Leland  Stanford 50,000.00  As  lo  the  inevitable  results  of  such  a  sys- 

Oct.  26.    Mark  Hopkins 5,000.00  tem,  dealing  on  a  vast  scale  in  rottenness,  I 

Nov.  I.    Leland  Stanford 83,418.00  will  give  a  few  incidents  much  more  signifi- 

Dec.  27.    Leland  Stanford 52,500.00  cant  than  any  description  could  possibly  be. 

'  Feb.  14.    Leland  Stanford 10,000.00  ^^"""^  them  the  discerning  will  see  clearly 

June  7.    Leland  Stanford 13,000.00  enough  what  a  bedraggled  pohtical  prosti- 

June  28.    Leland  Stanford 111,431.25  tute  California  has  become. 

Sept.  3.    Leland  Stanford 12,000.00  Mr.  Rea  says  that  when  Mr.  Feljon  was 

SepS:27.    Lelandltanford. ■..■.■.■.::    3!;^:^  nominated    for    the    United    States    Senate 

Oct.  4.    D.  D.  Colton 3,290.00  he  was  to  fill  an  unexpired  or  short  term. 

Nov.  12.    Leland  Stanford 46,816.94  Sixty  members  of  the  legislature  organized  a 

Nov.  12.    Leland  Stanford 18,168.71  Strikers'  Union  or  Black  Horse  Brigade  and 

'  March  25.    C.  Crocker 26,452.60  demanded  $i8o,ooo  hi  a  lump  sum  for  their 

March  28.    C.  Crocker 3,100.00  votes.     This,  for  a  short  term,  was  a  strong 

May  I.    C.  Crocker 40,000.00  advance  over  market  rates. 

May  6.    C.  Crocker .  ■■■-■■■ 40,000 .00  ^r.  Rea  protested  vigorously.     The  strik- 

Company^.^^^.'^". ..   ^^^.°^™.^.".^    40,745.25  ing  legislators  conferred,  and  then  informed 

July  23.    Leland  Stanford '500.00  Mr.  Rea  that  they  had  determined  to  insist 

Aug.  2.    Leland  Stanford 789 .  50  upon  their  terms  and  unless  thev  got  $180,000 

Sept.  27.    Leland  Stanford 38,15603  ^i^gy  would  proceed  at  once 'to   elect  one 

When  the  Pacific   Railroad   Commission  Johnson,   an  unknown  farmer  of  the  San 

.sought  to  learn  something  about  these  ex-  Joaquin  Valley. 

penditures  Mr.  Stanford,  under  oath,  could  This  same  James  W.  Rea,  to  whom  we  are 

not  remember  about  them  or  else  took  refuge  indebted  for  this  close  inside  view  of  the 

in  a  refusal  to  answer,  whereupon  Justice  machine  at  work,  was   at  one  time  a  state 

Field  and  Judge  Lorenzo  Sawyer  sustained  railroad  commissioner.     In  that  capacity  he 

his  refusal.  made  a  ruling  that,  for  reasons  not  necessary 

to  detail  here,  the  Southern  Pacific  did  not 
THE  MYSTERY  OF  MR.  STANFORD'S  SPENDING  like.     Officers  of  the  railroad  and  other  in- 
Then  the  Commission  tried  to  obtain  from  terests  demanded  that  this  ruling  be  reversed. 
Charles  F.   Crocker,  Vice-President  of  the  Rea  refused  to   reverse  it.      He  was  then 
*  See  Pacific  Railroad  Commission  Report,  p.  2999.   Mr.  threatened  with  the  venal  press.     He  defied 

Cohen,  attorney  for  the  railroad,  here  makes  an  admission  about        

these  expenditures  that  can  be  construed  to  mean  only  the  worst  *  Pacific  Railroad   Commission  Report,    testimony  of  C.  F. 

about  them.  Crocker,  p.  2998. 


850 


Hampton's  Magazine 


the  venal  press.  At  last  he  was  summoned 
before  C.  P.  Huntington,  who  happened  to  be 
then  in  San  Francisco.  Huntington  asked  him 
to  reverse  his  ruling.  Once  more  Rea  declined. 
"Then,"  said  Mr.  Huntington,  "I  shall 
have  to  give  the  word  to  impeach  you  in  the 
legislature  and  I  hate  very  much  to  do  it." 

MR.    REA   IS    NOT    IMPEACHED 

So  within  a  few  days  the  legislature  be- 
gan impeachment  proceedings  against  Rea. 
There  was  pending  at  the  time  a  reassess- 
ment bill  that  would  be  an  advantage  to  the 
railroad  and  for  which  many  legislators  had 
been  bribed  to  vote.  When  Rea  was  testify- 
ing before  the  House  in  the  impeachment 
trial  he  ripped  into  this  reassessment  bill, 
exposed  its  true  nature,  and  denounced  the 
corruption  that  had  been  used  in  its  behalf. 
The  next  day  the  official  records  were  muti- 
lated so  as  to  take  from  the  stenographer's 
report  every  reference  he  had  made  to  the 
reassessment  bill.  The  public,  therefore, 
never  knew  that  he  had  made  a  revelation 
on  this  subject,  and  the  House  proceeded  to 
pass  the  impeachment  bill. 

Mr.  Rea  had,  however,  impressed  certain 
facts  upon  certain  senators,  and  one  of  the 
facts  was  that  he  knew  perfectly  well  what 
were  the  conditions  in  that  body,  which  sen- 
ators were  getting  $5,000  a  year  each  as 
"negatives" — that  is  to  say,  for  merely  kill- 


JOHN  B.  GORDON,  SENATOR  FROM  GEORGIA 
IN   1877. 


ing  bills  that  the  railroad  desired  to  have 
killed — and  which  of  them  had  received  more 
for  extra  services.  Some  of  these  got  the 
idea  that  he  intended  to  make  a  sweeping 
and  sensational  expose  of  the  whole  business 
of  bribery.  They  came  to  him  and  opened  ne- 
gotiations that  ended  in  the  dropping  of  the 
impeachment  proceedings  and  the  concealing 
of  disagreeable  facts  about  eminent  statesmen .  * 

People  became  so  accustomed  to  such 
stories  that  conditions  were  regarded  as  a 
matter  of  course,  and  were  talked  of  with  a 
certain  naive  candor  inexpressibly  startling 
to  visitors  of  a  more  Puritanical  habit. 

When,  in  1885,  Leland  Stanford  was  elect- 
ed to  the  United  States  Senate  (an  event  that 
was  to  have  unexpected  results)  the  state 
laughed  and  discussed  the  price  as  it  would 
discuss  the  orange  market.  A  few  days  after 
the  legislature's  action  the  late  Senator  James 
G.  Fair  was  standing  in  front  of  the  Palace 
Hotel  in  San  Francisco,  meditatively  gazing 
into  the  street  and  chewing  a  toothpick. 

A  reporter  approached,  and,  being  old 
friends,  the  two  began  to  chat.  "Senator," 
said  the  reporter,  "how  much  do  you  think 
Stanford's  election  cost  him?" 

"Well,"  said  Senator  Fair,  pausing  evi- 
dently to  make  some  mental  calculations,"! 
can  judge  of  that  only  by  my  own  experience. 
From  what  it  cost  me  in  Nevada  I  should  say 
it  must  have  cost  Stanford  not  less  than  a 
million." 

Under  the  blight  of  years  of  railroad  domi- 
nation the  public  conscience  was  slowly  seared 
and  corruptionists  grew  bold  while  the  public- 
service  corporations  seemed  to  work  together. 

At  the  session  of  1897  the  San  Francisco 
Examiner  unearthed  a  condition  of  legislative 
corruption  that  would  have  appalled  another 
state.  To  complete  the  evidence  some  tele- 
grams were  needed  that  had  been  sent  via  the 
Western  Union.  An  investigating  committee 
subpoenaed  these  telegrams.  The  Western 
Union  undertook  to  rush  them  out  of  the  state 
over  the  Central  Pacific.  Just  l)efore  they  could 
cross  the  Nevada  line  the  Examiner  succeeded 
in  reaching  a  village  constable  with  antique 
courage.  He  held  up  the  train,  found  the 
])ox  containing  the  telegrams,  and  sent  it 
back  to  Sacramento  under  guard. 

When  it  was  opened  it  was  found  to  con- 
tain evidence  that  the  i:ailroad  company  had 
not  changed  its  methods  since  the  days  when 
Mr.  Huntington  "explained  things." 

*  See  Mr.  Rca's  full  st-itement  and  examination  in  the  San 
Francisco  Call,  July  4,  iyc8. 


I 


Scientific  Corruption  of  Politics 


SjI 


MR.   HUNTINGTON'S   WASHINGTON   CAREER 

We  shall  now,  if  you  please,  return  to  Air. 
Huntington  in  Washington  and  see  how  he 
fared  in  the  underworld.  It  is  really  an  ex- 
traordinary story,  for  he  went  there  a  country 
merchant  without  exi)erience  in  public  af- 
fairs, without  acquaintance  or  influence,  and 
he  managed  to  win  from  Congress  first  one 
huge  grab  at  the  public  resources  and  then 
another,  until  he  appeared  the  very  Colossus 
of  lobbyists.  In  the  history  of  Congress  no 
man  has  come  before  it  with  balder  proposi- 
tions of  private  gain  nor  maintained  them 
with  anything  like  his  success. 

Yet  about  this  we  should  be  under  no 
misapprehension.  Mr.  Huntington  was  no 
wonder-worker,  no  spellbinder,  no  wielder  of 
the  magic  of  eloquence.  He  was  a  practical 
man.  We  are  not  to  believe  that  he  entered 
Washington  an  unlettered  trader  and  by  force 
of  argument  swayed  great  statesmen  to  his 
will.  He  led  against  Congress  a  band  of 
legislative  experts,  well  supplied  with  money; 
they  did  the  rest. 

From  1862  until  1896,  he  spent  most  of  his 
time  in  Washington  and  attended  and  nar- 
rowly scrutinized  every  session  of  Congress. 
In  those  thirty-four  years  he  passed  through 
Congress  a  great  many  bills  that  he  wanted 
to  have  passed;  he  killed  innumerable  bills 
that  he  wanted  to  have  killed;  he  utterly 
wrecked  and  ruined  the  almost  life-long  plans 
of  his  one  great  competitor;  he  exercised  in  all 
administrations  and  upon  most  departments  a 
sinister  and  imperial  power;  and  on  only  two 
occasions  was  he  really  defeated. 

The  history  of  parliamentary  government 
shows  no  fellow  to  this  career. 

I  am  going  to  let  Mr.  Huntington  tell  what 
he  will  about  it. 

He  had  in  his  employ  in  1862,  and  for 
many  years  thereafter,  one  General  Franchot, 
quite  well  known  in  Washington;  also  one 

♦Pacific  Railroad  Commission  Report.. 


JOHN  P.  JONES,  SENATOR  FROM  NEVADA  IN 
1877. 

Beard,  one  Bliss,  one  Sherrill,  and  others. 
Before  the  Pacific  Railroad  Commission  in 
1887,  he  was  asked  about  the  nature  of 
General  Franchot's  ministrations. 

"He  was,"  said  Mr.  Huntington,  largely, 
"a  very  honorable  man  whom  I  had  known 
since  I  was  a  boy,  and  he  had  my  entire  con- 
fidence." 

The  Commission  had  discovered  (from 
other  sources)  that  Franchot  drew  from  Mr. 
Huntington  $30,000  or  $40,000  every  year 
without  vouchers,  and  Mr.  Huntington  was 
asked  to  throw  light  on  this  strange  fact.  He 
said: 

"We  had  to  get  men  to  explain  a  thousand 
things.  A  man  who  has  not  had  the  experi- 
ence could  hardly  imagine  the  number  of 
people  that  you  have  to  explain  these  mat- 
ters to."  * 

Still,  the  Commission  was  not  quite  content 
with  this  luminous  answer  and  wanted  to 
know  more.  It  appeared  that  in  1873,  for 
instance,  General  Franchot's  work  in  Wash- 
ington had  cost  $61,000,  without  any  vouch- 
ers. Mr.  Huntington  sounded  still  the  pipe 
of  praise. 

"He  was,"  said  he,  "of  the  strictest  integ- 

*  Pacific  Railroad  Commission  Report,  Testimony  of  Hunt- 
ington, p  25. 


Southern   Pacific   Disbursements  at  Washington 
(Without  adequate  Vouchers)  for  "Expenses" 


1872 

Jan.  13.  R.  Franchot..  $33.00 

Jan.  18.  B.  Franchot..  13,200.00 

Mch.  11.  C.  P.  Hunt- 
ington   1,000.00 

Mch.  15.    R.  Franchot.  1,000.00 

Mch.  23.  C.  P.  Hunt- 
ington    500.00 

Apr.  26.  C.  P.  Hunt- 
ington    500.00 

May  11.  C.  P.  Hunt- 
ington   500.00 

May  17.  C.  P.  Hunt- 
ington   1,000.00 

May  17.    R.  Franchot.  5,000.00 

June  5.    R.  Franchot. .  5,000.00 

July  31.  C.  P.  Hunt- 
ington   500.00 

Aug.  24.  C.  P.  Hunt- 
ington   500.00 

Sept.  24.    R.  Franchot.  19,295..->0 

Oct.  2.    I.  E.  Gates.  . .  5,000.00 

Nov.  1.    I.  E.  Gates. . .  500.00 

Nov.  15.  C.  P.  Hunt- 
ington   1,000.00 

Nov.  21.    I.  E.  Gates. .  500.00 

Nov.  29.    I.  E.  Gates. .  4,000.00 

Dec.  28.    I.  E.  Gates  .  .  200.00 

Dec    31.    "Services  in 

1872" 13,233.33 

Total $72,461.83 


1874. 

Jan.  13.    R.  Franchot. 

Jan.  16.    I.  E.  Gates.. . 

Mch.  14.   Fisk  &  Hatch 

May  14.  C.  P.  Hunt- 
ington   

June  15.    Fisk  &  Hatch 

June  22.  C.  P.  Hunt- 
ington   

June  27.    R.  Franchot. 

July  9.    R.  Franchot . . 

July  10.    I.  E.  Gates.. 

July  11.    I.  E.  Gates.. 

Sept.  11.  C.  P.  Hunt- 
ington   

Oct.  16.    I.  E.  Gates... 

Oct.  23.    I.  E.  Gates... 

Nov.  Gen.  Dwyer,  U. 
S.  Commissioner. .  .  . 

Dec.  2.  "W.  A.  W.," 
paid  by  C.  P.  Hunt- 
ington   

Dec.  29.  C.  P.  Hunt- 
ington  


$500.00 

200.00 

12,139.94 

500.00 
1,910.00 

20,000.00 

3,700.00 

150.00 

200.00 

200.00 

5,000.00 
281.00 
200.00 

1,000.00 


4,863.48 
2,000.00 


Total $52,844.42 

1876. 

Jan.  4.  N.  T.  Smith, 
for  amount  paid  H. 
Brown $5,000.00 

Jan.  24.  C.  P.  Hunt- 
ington         2,.500.00 

Mch.  31.    I.E.Gates..        5,000.00 

Apr.  1.  C.  P.  Hunt- 
ington         5,000.00 

Apr.  6.  C.  P.  Hunt- 
ington         5,000.00 

Apr.    19.    "Attorney" 

fee 5,000.00 

May  4.  Anna  Fran- 
chot        25,000.00 

May  12.    I.  E.  Gates  . .        5,000.00 

May  15.    I.  E.  Gates. .        5,000.00 

May  19.    I.E.Gates..        1,000.00 

June   2.    S.   C.    Pome- 

roy 1,000.00 

June  3.    I.  E.  Gates.  . .        5,000.00 

June  19.    I.  E.  Gates.  .      10,000.00 

June  — .  New  York 
newspapers.  Tribune, 
Times.  World,  and 
Bulletin 3,381.45 

July   19.    C.   H.   Sher- 

rill 3,000.00 

July  26.    I.E.  Gates  . .      10,000.00 


July  12.    S.  L.  H.  Bar- 
low   $2,000.00 

Aug.      18.    R.   B.  Mit- 
chell   1,500.00 

Aug.     21.    S.    W.    Kel- 
logg   600.00 

Sept.  12.  Lyman  Trum- 

ball 10,000.00 

Sept.  — .   R.  Franchot.  15,698.92 
Oct.    4.    C.    P.    Himt- 

ington 500.00 

Oct.    5.    C.    P.    Hunt- 
ington   2.500.00 

Oct.    14.    C.   P.   Hunt- 
ington   6,300.00 

Oct.  17.  I.  E.  Gates...  5,000.00 
Oct.  21.  I.  E.  Gates., .  5.000.00 
Oct.  23.  I.  E.  Gates.. .  1,000.00 
Oct.  26.  I.  E.  Gates.. .  700.00 
Oct.  30.  I.  E.  Gates.. .  1,000.00 
Oct.  10.  Legal  Ex- 
penses   2..500.00 

Nov.  3.  D.  D.  Colton.  8,000.00 
Nov.  8.  D.  D.  Colton.  8,000.00 
Nov.  13.  I.E.Gates..  1,000.00 
Nov.  14.  I.  E.  Gates. .  1,000.00 
Nov.  15.  I.  E.  Gates. .  1,000.00 
Nov.  16.  C.  P.  Hunt- 
ington   5,000.00 

Dec.  1.    I.  E.  Gates  . .  .  3.000.00 

Dec.  7.    I.E.Gates...  1,000.00 

Total $1,78.180.37 


1877. 

Jan.  3.  "Legal  ex- 
penses  

Jan.  8.    I.  E.  Gates..  .  . 

Jan.  15.  "Legal  ex- 
penses"  

Feb.  6.  Western  De- 
velopment Company 

Feb.  19.    I.  E.  Gates. . 

Feb.  26.  C.  P.  Hunt- 
ington   

Mch.  9.    I.  E.  Gates... 

Mch.  12.  Jas.  H. 
Storrs 

Mch.  24.    I.  E.  Gates.. 

Mch.  29.    I.  E.  Gates.. 

Apr.  23.  C.  H.  Sher- 
rill 

May  9.  C.  H.  Sher- 
rill 

May  24.    I.  E.  Gates. . 

June  2.    C.  H.  Sherrill. 

June  4.    C.  H.  Sherrill. 

June  30.  C.  P.  Hunt- 
ington   

July  2.    I.  E.  Gates.... 

Sept.  5.  C.  P.  Hunt- 
mgton 

Sept.  7.  "L^a  ex- 
penses"  

Sept.  15.  C.  P.  Hunt- 
ington   

Sept.  20.  C.  P.  Hunt- 
ington   

Oct.  5.  C.  P.  Hunt^ 
ington 

Oct.  15.  C.  P.  Hunt- 
ington  

Oct.  24.  C.  P.  Hunt- 
ington   

Oct.  26.  H.  Hopkins 
order 

Nov.  1.  Leland  Stan- 
ford   

Nov.  9.    I.  E.  Gates. . . 

Nov.  16.    I.  E.  Gates. . 

Dec.  8.    I.  E.  Gates..  . 

Dec.  18.    I.  E.  Gates. . 

Dec.  19.    I.  E.  Gates.. 

Dec.  26.  C.  P.  Hunt- 
ington  

Dec.  28  Leland  Stan- 
ford   


$10,000.00 
5,000.00 

5,000.00 

26,000.00 
10,000.00 

5,000.00 
2,000.00 

1,125.35 

500.00 

5,000.00 

15,000.00 

300.00 
5.000.0J 
2,000.00 
1.000.00 

5,000.00 
200.00 

1,000.00 

10,440.00 

1,000.00 

3,000.00 

1,500.00 

2,000.00 

1 ,000.00 

5.000.00 

S3  418.08 
5.000.00 
5,000.00 
2..500.00 
5,000.00 
1,000.00 

2,000.00 

52,500.00 


Total $279,483.43 


1878. 

Jan.    11.    C.   P.   Hunt- 
ington   $1,150.00 

Jan.  28.    I.  E.  Gates...  1,600.00 
Feb.  14.    L.Stanford..  1,000,00 
Feb.  20.    C.  P.   Hunt- 
ington   2,500.00 

Mch.  18.    C.  P.  Hunt- 
ington   5,500.00 

Mch.  19.    C.  P.  Hunt- 
ington   4,500.00 

April  12.    I.E.Gates..  1,750.00 

Apr.  IS.    I.  E.  Gates.  .  200.00 
May  4.   J  am  e  s     H. 

Storrs 1.000.00 

May  20.    I.  E.  Gates. .  5,000.00 

May  25.    I.  E.  Gates. .  2,500.00 

May  27.    I    E.  Gates. .  5,000.00 

June  7.    L.  Stanford  . .  13,000.00 

June  22.    I.  E.  Gates. .  2,000.00 

June  25.    I.  E.  Gates. .  500.00 

June  28.    L.Stanford..  111,431.25 
June     29.    Joseph     H. 

Bell 38.600.00 

June  29.    C.  P.  Hunt- 
ington   99.167.20 

Aug.  2.    A.  J.  Howell. .  200.00 
Aug.     3.    J  a  m  e  s    A. 

George 300.00 

Aug.   15.    C.  P.  Hunt- 
ington   42.855.06 

Aug.     15.   New    York 

Items 1.166.66 

Aug.    19.    T.   M.   Nor- 
wood    287.95 

Aug.   29.    John  Boyd..  200.00 
Sept.    3.    Leland  Stan- 
ford   12,000.00 

Sept.  3.    A.  J.    Howell  200.00 
Sept.   3.    J.  A.  George.  150.00 
Sept.    4.    T.    M.    Nor- 
wood   1.000.00 

Sept.  4.    S.  T.  Gage...  3,000.00 
Sept.  14.    I.E.Gates..  1,500.00 
Sept.   14.    O.  M.  Brad- 
ford   75.00 

Sept.  23.    D.D.  Colton.  1,200.00 

Sept.  23.    J.  A.  George.  150.00 

Sept.  27.    I.  E.  Gates  .  .  5,000.00 

Sept.  27.    J.G.Prentiss  60.00 

Sept.  28.    I.  E.  Gates. .  2,000.00 

Oct.  1.    D.  D.  Colton..  3,460.00 

Oct.  1 .    John  Boyd 200.00 

Oct.  1.    John  Boyd 204.00 

Oct.  1.  J.A.Howell..  200.00 
Oct.  1.  J.A.George...  250.00 
Oct.  3.  I.E.Gates....  5,000.00 
Oct.  4.  D.D.  Colton..  3,290.00 
Oct.  5.  I.  E.  Gates..  . .  2,000.00 
Oct.  7.  I.  E.  Gates., . .  1,000.00 
Oct.  7.  J.  E.  Forney  . .  300.00 
Oct.  10.  T.E.Gates..  2,000.00 
Oct.  19.  I.E.Gates..  6,000.00 
Oct.  22.  I.E.Gates..  3.500.00 
Oct.  24.  C.  P.  Hunt- 
ington   3.000.00 

Oct.  26.    I.E.Gates..  10,000.00 
Oct.  28.    I.E.Gates..  10,000.00 
Nov.  2.    John  Boyd.  . .  224.00 
Nov.    2.    T.    M.    Nor- 
wood   1,083.98 

Nov.  11.    I.E.Gates..  500.00 
Nov.  13.    I.  E.  Gates. .  1,500.00 
Nov.   21.    C.   H.   Sher- 
rill   1,000.00 

Nov.  21.    O.  M.  Brad- 
ford   75.00 

Nov.  22.    J.  A.  George.  100.00 
Nov.  27.    I.  E.  Gates. .  500.00 
Nov.   27.    T.   M.   Nor- 
wood    500.00 

Dec.  2.    John  Boyd....  200.00 

Dec.  5.    I.  E.  Gates.  .  .  10,000.00 

Dec.  9.    I.  E.  Gates.  .  .  2,800.00 

Dec.  17.    I.  E.  Gates.  .  10,500.00 
Dec.     23.    J  o  h  n     H  . 

P'lagg 100.00 

Dec.  26.    I.  E.  Gates  . .  500.00 

Total $447,630.10 


*  Tables  from  Pacific  Railroad  Commission  RepMjrt. 


i 

^pty  and  as  pure  a  man  as  ever  lived;  and 
BIrhen  he  said  to  us,  'I  want  $10,000,'  I  knew 

it  was  proper  to  let  him  have  it  and  I  let  him 

have  it."  * 

Examination  by  Commissioner  Anderson: 

Question. — How  could  Mr.  Franchot  personally 
earn  $30,000  or  $40,000  a  year  in  explaining  things 
to  members  of  Congress? 

Answer. — He  had  to  get  help.  He  had  lots  of 
attorneys  to  help  him. 

Q. — Whom  did  he  have? 
^v  A. — I  never  asked  him. 
^B  Q. — How  do  you  know  he  had? 
^»  A. — Because  he  told  me  so.     He  said,  "  For  these 
explanations  I  have  to  pay  out  a  little  here  and  a 
little  there  and  that  aggregates  a  great  deal."  t 

Q. — In  addition  to  explaining  with  words  do  you 
not  suppose  they  explained  with  champagne  and  ex- 
pensive dinners? 

A. — Very  likely.  I  never  gave  a  dinner  in  Wash- 
ington. 

Q. — Was  not  a  great  deal  of  it  spent  in  cigars 
and  champagne  dinners? 

A. — I  think  so.  Not  so  much,  but  perhaps  some 
of  it  was  to  get  some  able  man  to  sit  down  and  ex- 
plain in  the  broadest  sense  what  we  wanted  to  have 
done.  J 

It  appears  that  up  to  1887,  the  total  expen- 
ditures of  the  Southern  Pacific  at  Washington 
(without  adequate  vouchers)  were  $5,497,- 
538.§  The  important  point  about  these  ex- 
penditures is  that  they  were,  for  the  most  part, 
of  money  that  really  belonged  to  the  people 
of  the  United  States  because  it  was  money 
that  should  have  been  paid  into  the  National 
Treasury  as  interest  on  the  road's  indebted- 
ness. To  use  public  funds  to  induce  public 
servants  to  give  away  more  public  funds 
seems  an  extraordinary  achievement  in  the  his- 
tory of  legislation,  but  one  of  which  the  South- 
ern Pacific  gentlemen  were  easily  capable. 

Mr.  Huntington  is  Incautious 
Subsequently  Mr.  Huntington,  examined 
under  oath,  was  asked  this  question: 

Q. — In  regard  to  the  range  of  discussion  that  was 
to  be  permitted  between  the  members  of  Congress 
and  the  apostles  that  you  sent  to  them,  was  that 
generally  confined  to  Mr.  Franchot  and  Mr.  Sher- 
rill,  or  did  you  take  a  hand  in  that? 

A. — Probably  it  was  done  more  or  less  by  General 
Franchot,  Mr.  Sherrill,  and  myself. 

Q. — .\s  a  matter  of  fact,  did  they  from  time  to 
time  consult  with  you  ? 

A.— They  did. 

And  then  for  the  first  and  only  time  in 
all  these  examinations  Mr.  Huntington  was 
shaken  out  of  his  wary  self-possession  and 
ability  to  dodge  and  twist. 

*  Pacific  Railroad  Commission  Report,  Testimony  of   Hunt- 
ington, p.  34.  t  Ibid.,  p.  38.  t  Ibid.,  p.  38. 
3  Pacific  Railroad  Commission  Report,  p.  39. 


Scientific  Corruption  of  Politics 


853 


Q. — But  what  I  want  to  get  at  particularly  is  that 
no  portion  of  these  moneys  was  to  be  considered  as 
covered  by  the  ordinary  expenditures  of  a  railroad 
for  purchases  of  property  and  materials.  Those 
would  be  specific  vouchers.  So  that  as  to  all  the  unex- 
plained vouchers  we  may  assume  that  they  were  for 
moneys  e.xpended  for  imparting  information  to  Con- 
gress, or  to  the  Departments,  or  for  some  purpose  of 
that  character? 

A. — That  I  cannot  say.  Most  of  the  money  was 
expended,  no  doubt,  to  prevent  Congress  and  the 
Departments  from  robbing  us  of  our  property.* 

I  put  down  all  these  things  to  complete 
the  study  of  an  intensely  interesting  human 
document.  You  observe,  no  doubt,  how 
agilely  Mr.  Huntington  glides  over  the  thin- 
nest places  and  how  honest  he  looks,  how 
plausible  he  makes  his  cause  look. 

So,  then,  we  should  have  interest  in 
noting  on  page  852  some  of  Mr.  Hun- 
tington's unexplained  vouchers,  observing 
first  that  "I.  E,  Gates"  was  a  confidential 
clerk  in  his  employ  and  that  here,  as  in  the 
former  case,  the  list  we  present  is  not  com- 
plete. 

Eleven  years  of  expenditures  for  "explain- 
ing" things  in  behalf  of  the  Central  Pacific 
and  Southern  Pacific — being  some  of  the 
unexplained  vouchers  charged  to  "expenses" 
upon  which  the  officers  of  the  company 
refused  to  throw  any  light — make  this  show- 
ing: 


1870 $63,581.03 

1871 13,498.72 

1872 73,361.83 

1873 7.348.46 

1874 52,844-94 

1875 197.311-54 


1876 299,301.37 

1877 279;573.44 

1878 471,081.06 

1879 244,298 .  08 

1880 197,809.36 

Total.  .111,900,009.83 


In  the  foregoing  lists  the  most  interesting 
exhibits  are  those  for  1877-78  when  Hunt- 
ington was  defeating  Tom  Scott,  and  for  the 
years  in  which  the  legislature  was  in  session 
at  Sacramento.  In  running  over  the  lists  of 
unexplained  expenditures  one  can  usually  de- 
fine the  legislative  sessions  by  the  crowded 
entries. 

In  1884,  the  sums  drawn  by  Charles  F. 
Crocker  without  explanation,  total  $404,- 
710,  and  in  the  early  part  of  1885,  $55,000. 
S.  T.  Gage,  one  of  the  railroad's  legislative 
agents,  drew  out  $18,150  in  1884  and  $119,- 
341  in  the  first  part  of  1885  —  about  the 
time  that  Leland  Stanford  was  drawing 
$40,066.95  for  a  similarly  unexplained  pur- 
pose. 

Here  is  the  way  some  of  these  items  look 
in  the  records  for  part  of  one  month: 

*  Pacific  Railroad  Commission  Report,  p.  37  it  scq. 


854 


Hampton's  Magazine 


March,  1885. 

7- 

S.  T.  Gage. 

$2,500 

10. 

Charles    F 

Crocker..  . 

5,000 

12. 

S.  T.  Gage. 

3,000 

16. 

Charles    F 

Crocker. . . 

29,000 

17- 

S.  T.  Gage. 

4 1 ,000 

18. 

S.  T.  Gage. 

3,000 

19. 

S.  T.  Gage. 

9,000 

20.  S.  T.  Gage. $15,000 

21.  S.  T.  Gage.  .21,000 
23.  Charles    F. 

Crocker..  .  .  15,500 
23.  S.T.Gage  for 
H.  H.  Cum- 

niings i)25o 

23.  S.  T.  Gage.  .    8,500 

Total S1S3.750 

All  without  explanation.  The  legislature 
was  in  session.  It  was  the  legislature  that 
about  this  time  elected  Leland  Stanford  to 
the  United  States  Senate  to  succeed  J.  T. 
Farley,  Democrat. 

Huntington's  Quarrel  with  Stanford 

Mr.  Huntington  was  not  pleased  with  the 
legi-slature's  choice.  For  years  heand  Stanford 
had  been  growing  estranged.  The  reason  is 
generally  understood  in  California ;  but  being 
related  to  private  life  need  not  be  gone  into 
here.  Huntington  had  thought  A.  A.  Sargent 
should  go  back  to  the  Senate  and  he  took  un- 
usual ways  to  make  known  his  resentment 
w^hen  Stanford  took  the  place  for  himself.* 

In  1 888  he  suddenl\-  gave  out  an  interview 
containing  a  statement  that  was  construed  to 
mean  that  Stanford  had  paid  $500,000  of  the 
railroad  company's  money  for  his  election  to 
the  Senate.  This  angered  Stanford  and  an 
open  breach  was  imminent.  It  was  patched 
up  in  some  way,  the  common  report  being  that 
Stanford  had  threatened  Huntington  with 
counter  revelations. 

Subsequently  Huntington  revenged  himself 
by  securing  Stanford's  removal  as  president 
of  the  Central  Pacific,  which  place  he  had 
held  continuously  since  the  organization  of 
the  company  in  i86i. 

Very  interesting  disclosures  might  have 
been  made  on  both  sides  concerning  other 
uses  of  the  company's  money.  Thus  it  ap- 
pears now  that  one  of  the  most  famous  edi- 
tors of  San  Francisco  was  on  the  pay  roll  at 
$10,000  a  year,  a  famous  Washington  corre- 
spondent for  an  immaculate  New  York  news- 
paper received  $5,000  a  year,  and  one  reading 
the  lists  is  continually  startled  by  the  recur- 
rence of  names  that  are  also  the  names  of 
senators  and  public  ofl&cers  very  prominent 
in  their  day. 

All  of  these  expenditures  are  unexplained 
otherwise  than  as  "expenses"  or  "legal  ex- 
penses." 

But  the  final  light  as  to  Mr.  Huntington's 


*  See  Mr.  Charles  D wight  Willard's  interesting  book,  "The 
Free  Harbor  Contest,"  p.  S9- 


methods  in  Washington  and  what  he  meant 
by  "explaining  things"  is  contained  in  the 
following  remarkable  correspondence:* 

New  York,  November  6,  1874. 
Friend  Colton  :  As  you  now  seem  to  be  one  of  us 
I  shall  number  your  letters,  or  rather  mine  to  you, 
as  with  those  sent  to  my  other  associates  in  Cali- 
fornia. ...  I  notice  what  you  say  of  Hager  and 
Luttrell,  and  notwithstanding  what  T.  says,  I  know 
he  can  be  persuaded  to  do  what  is  right  in  relation 
to  the  C.  P.  and  S.  P.  but  some  political  friend  must 
see  him,  and  not  a  railroad  man,  for  if  any  of  our 
men  went  to  see  him  he  would  be  sure  to  lie  about 
it  and  say  that  money  was  offered  him,  but  some 
friend  must  see  him  and  give  him  solid  reasons  why 
he  should  help  his  friends.  Yours  truly,  C.  P. 
Huntington. 

The  congressional  directories  give  the 
names  of  John  S.  Hager,  of  San  Francisco,  a.s 
a  Senator  from  California  in  the  Forty-third 
Congress  and  John  K.  Luttrell, of  Santa  Rosa, 
as  a  Representative  in  the  Forty -fifth  Congress. 

New  York,  November  20,  1874. 

Friend  Colton:  Herewith  I  send  copy  of  bill  that 
Tom  Scott  proposes  to  put  through  Congress  this 
winter.  Now  I  wish  you  would  at  once  get  as  many 
of  the  associates  together  as  you  can  and  let  me 
know  what  you  then  want.  Scott  sent  me  these 
copies  fixed  as  he  wants  them  and  asked  me  to  help 
him  pass  them  through  Congress,  or  if  I  would  not  do 
it  as  he  has  fixed  them,  then  he  asked  me  to  fix  it  so 
that  I  will,  or  in  a  way  that  I  will  support  it. 

Now  do  attend  to  this  at  once  and  in  the  meantime 
I  will  fix  it  here  and  then  see  how  near  we  are  to- 
gether when  yours  gets  here.  Scott  is  prepared  to  pay 
or  promises  to  pay  a  large  amount  of  money  to  pass 
his  bill,  but  I  do  not  think  he  can  pass  it,  although  I 
think  that  this  coming  session  of  Congress  will  be 
composed  of  the  hungriest  set  of  men  that  ever  got 

together  and  the  d only  knows  what  thev  will 

do.  .  .  . 

Would  it  not  be  well  for  you  to  send  some  party 
down  to  .\rizona  to  get  a  bill  to  build  in  the  Terri- 
torial legislature  granting  the  right  to  build  a  R.  R. 
east  from  the  Colorado  River  (leaving  the  river 
near  Fort  Mojave),  have  the  franchise  free  from 
taxation  on  its  property  and  so  that  the  rates  of 
fare  and  freight  cannot  be  interfered  with  until  the 
dividends  of  the  common  stock  shall  exceed  ten  per 
cent  ?  I  think  that  would  be  about  as  good  as  a 
land  grant.  It  would  not  do  to  have  it  known  that  - 
we  had  any  interest  in  it,  for  the  reason  that  it  would 
cost  us  much  more  money  to  get  such  a  bill  through 
if  it  was  known  that  it  was  for  us.  And  then  Scott 
would  fight  it  if  he  thought  we  had  anything  to  do 
with  it.  If  such  a  bill  was  passed,  I  think  there  could 
at  least  be  got  from  Congress  a  wide  strip  for  right 
of  way,  machine  shops,  etc.  Yours  truly,  C.  P. 
Huntington. 

New  York,  December  i,  1874. 

Friend  Colton:  Your  letters  of  November  20th, 
2 ist  and  22d  are  received.  .  .  .  Has  any  of  our  peo- 
ple endeavored  to  do  anything  with  Low  and  Fris- 
bie?  They  are  both  men  that  can  be  convinced. 
...  I  will  see  Luttrell  when  he  comes  over  and 
talk  with  him,  and  maybe  he  and  we  can   work 

*  Evidence  in  Ellen  M.  Colton  vs.  Stanford,  el  al. 


Scientific  Corruption  of  Politics 


855 


together,  but  if  we  can  brush  him  out  it  would  have 
a  good  effect  and  then  we  could  or  at  least  try  to 
get  some  better  timber  to  work  with.  .  .  .  And  in 
this  connection  it  would  help  us  very  much  if  we 
could  fix  up  California  Pacific  income  and  exten- 
sions on  the  basis  we  talked  of  even  if  we  had  to 
pay  something  to  convince  Low  and  Frisbic.  Yours 
truly,  C.  P.  Huntington. 

DEFEATING   A   "wiLD   HOG" 

New  York,  May  i,  1875. 
P'riend  Colton:  Yours  of  the  17th  of  April,  No. 
17,  is  received  and  contents  carefully  noted.  .  .  . 
1  notice  what  you  say  of  Luttrell;  he  is  a  wild  hog; 
don't  let  him  come  back  to  Washington,  but  as  the 
House  is  to  be  largely  Democratic,  and  if  he  was  to 
be  defeated,  likely  it  would  be  charged  to  us,  hence 
I  should  think  it  would  be  well  to  beat  him  with  a 
Democrat;  but  I  would  defeat  him  anyway  and  if  he 
got  the  nomination,  put  up  another  Democrat  and  run 
against  him,  and  in  that  way  elect  a  Republican. 
Beat  him.     Yours  truly,  C.  P.  Huntington. 

New  York,  September  27,  1875. 
Friend  Colton:  Yours  of  the  i8th  with  inclosure 
as  stated  is  received.  .  .  ,  Scott  is  making  the  strongest 
possible  efiort  to  pass  his  bill  the  coming  session  of 
Congress.  ...  If  we  had  a  franchise  to  build  a  road 
or  two  roads  through  Arizona  (we  contracting,  but 
having  it  in  the  name  of  another  party),  then  have 
some  party  in  Washington  to  make  a  local  fight  and 
asking  for  the  guarantee  of  their  bonds  by  the  United 
States,  and  if  that  could  not  be  obtained,  offering  to 
build  the  road  without  any,  and  it  could  be  used 
against  Scott  in  such  a  way  that  I  do  not  believe  any 
politician  would  dare  vote  for  it.  Can  you  have 
Safford  call  the  legislature  together  and  grant  such 
charters  as  we  want  at  a  cost  of  say  $25,000?  If 
we  could  get  such  a  charter  as  I  spoke  to  you  of  it 
would  be  worth  much  money  to  us.  .  .  .  Yours  truly, 
C.  P.  Huntington. 

Safford  was  Governor  of  Arizona. 

New  York,  October  iq,  1875. 
Friend  Colton:  ...  I  have  given  Gilbert  C. 
Walker  a  letter  to  you.  He  is  a  member  of  the 
Forty-fourth  Congress,  ex-Governor  of  Virginia,  and 
a  slippery  fellow,  and  I  rather  think  in  Scott's  in- 
terest, but  not  sure.  I  gave  him  a  pass  over  C. 
P.  and  got  one  for  him  on  U.  P.  So  do  the  best 
you  can  with  him  but  do  not  trust  him  much. 
Yours  truly,  C.  P.  Huntington. 

The  Congressional  Directory  gives  the 
name  of  Gilbert  C.  Walker,  of  Richmond, 
Virginia,  as  a  member  of  the  Forty-fourth 
Congress. 

New  York,  November  10,  1S75. 
Friend  Colton:  .  .  .  Dr.  Gwin  is  also  here. 
I  think  the  doctor  can  do  us  some  good  if  he  can 
work  under  cover,  but  if  he  is  to  come  to  the  surface 
as  our  man  I  think  it  would  be  better  that  he  should 
not  come,  as  he  is  very  obnoxious  to  very  many  on 
the  Republican  side  of  the  House.  ...  I  am,  how- 
ever, disposed  to  think  that  Gwin  can  do  us  some 
good;  but  not  as  our  agent  but  as  an  anti-subsidy 
Democrat,  and  also  as  a  Southern  man  with  much 
influence.  .  .  .  But  Gwin  must  not  be  known  as 
our  man.  .  .  .  Yours,  etc.,  C.  P.  Huntington. 


William  M.  Gwin,  of  San  Francisco,  appears 
in  the  congressional  directories  as  a  Sena- 
tor from  California  in  the  Thirty-sixth  Con- 
gress. 

December  10,   1875. 

Friend  Colton:  ...  I  had  a  talk  with  Bris- 
tow.  Secretary  of  the  Treasury.  He  will  be  likely 
to  help  us  fix  up  our  matters  with  the  government 
on  a  fair  basis.     Yours  truly,  C.  P.  Huntington. 

Benjamin  H.  Bristow,  of  Kentucky,  was 
Secretary  of  the  Treasury  in  the  second  ad- 
ministration of  Grant. 

Here  are  extracts  from  other  letters  signed 
"Yours  truly,  C.  P.  Huntington,"  and  ad- 
dressed "Friend  Colton." 

THE    "dam   interviewers"    BOTHER    HIM 

New  York,  December  22,  1875. 
...  I  think  the  Doctor  will  return  to  California 
in  January.  I  have  just  returned  from  Washington. 
The  Doctor  (Gwin)  was  unfortunate  about  the 
R.  R.  committee;  that  is,  there  was  not  a  man  put 
on  the  committee  that  was  on  his  list,  and  I  must 
say  I  was  deceived  and  he  was  often  with  Kerr  and 
K.  was  at  his  rooms  and  spent  nearly  one  evening. 
The  committee  is  not  necessarily  a  Texas  Pacific, 
but  it  is  a  commercial  com.  and  I  have  not  much 
fear  but  that  they  can  be  convinced  that  ours 
is  the  right  bill  for  the  country.  If  things  could 
have  been  left  as  we  fixed  them  last  winter  there 
would  have  been  little  difficulty  in  defeating  Scott's 
bill;  but  their  only  argument  is  it  is  controlled  by 
the  Central.  That  does  not  amount  to  much  be- 
yond this:  It  allows  members  to  vote  for  Scott's  bill 
for  one  reason,  and  give  the  other,  that  it  was  to 
break  up  a  great  monopoly,  etc.  If  these  dam 
interviewers  would  keep  out  of  the  way  it  would  be 
much  easier  traveling. 

Michael  C.  Kerr,  of  Indiana,  was  Speaker 
of  the  House. 

Yours  of  December  30th  and  the  ist  inst.,  Nos.  120 
and  121  received:  also  your  telegram  that  William 
B.  Carr  has  had  for  his  services  $60,000  S.  P.  bonds; 
then  asking  how  much  more  I  think  his  services  are 
worth  for  the  future.  That  is  a  very  difficult  ques- 
tion to  answer  as  I  do  not  know  how  many  years 
Mr.  Carr  has  been  in  our  employ  or  how  far  in  the 
future  we  should  want  him.  In  view  of  the  many 
things  we  now  have  before  Congress,  and  also  in 
this  sinking  fund  that  we  wish  to  establish,  m  which 
we  propose  to  put  all  the  company's  lands  in  Utah 
and  Nevada,  it  is  very  important  that  his  friends  in 
Washington  should  be  with  us,  and  if  that  could 
be  brought  about  by  paying  Carr,  saj*,  $10,000  to 
$20,000  per  year,  I  think  we  could  afford  to  do  it, 
but  of  course  not  until  he  had  controlled  his  friends. 
They  could  hurt  us  very  much  in  this  land  matter; 
although  I  would  not  propose  to  put  the  land  in  at 
any  more  than  it  is  worth,  say  $2.50  an  acre.  I 
would  like  to  have  you  get  a  written  proposition 
from  Carr  in  which  he  would  agree  to  control  his 
friends  for  a  fixed  sum,  then  send  it  to  me.  .  .  . 

William  B.  Carr  was  an  influential  poli- 
tician in  San  Francisco. 


856 


Hampton's  Magazine 


.^^'"^ 


JAMES  W.  REA,  WHO  EXPOSED  THE  WORK- 
INGS  OF  THE   RAILROAD   IN  THE  CALI- 
FORNIA LEGISLATURE. 

New  York,  January  17,  1876. 
...  I  have  received  several  letters  and  tele- 
grams from  Washington  to-day,  all  calling  me  there, 
as  Scott  will  certainly  pass  his  Texas  Pacific  bill 
if  I  do  not  come  over  and  I  shall  go  over  to-night, 
but  I  think  he  could  not  pass  his  bill  if  I  should 
help  him;  but  of  course  I  cannot  know  this  for  cer- 
tain, and  just  what  effort  to  make  against  him  is 
what  troubles  me.  It  costs  money  to  fix  things  so 
that  I  would  know  that  his  bill  would  not  pass.  I 
believe  with  $200,000  I  can  pass  our  bill,  but  I  take 
it  that  it  is  not  worth  this  much  to  us. 

New  York,  January  29,  1876. 
.  .  .  Then  on  our  side  we  have  Sargent,  Booth, 
Jones,  Cole,  and  Gorham  in  the  Senate  to  help  us. 
.  .  Scott  is  working  mostly  among  the  commer- 
cial men.  He  switched  Senator  Spencer  of  Ala- 
bama, and  Walker  of  Virginia,  this  week,  but  you 
know  they  can  be  switched  back  with  proper  argu- 
ments when  they  are  wanted;  but  Scott  is  asking 
for  so  m.uch  that  he  can  promise  largely  to  pay  when 
he  wins,  and  you  know  I  keep  on  high  ground.  All 
the  members  in  the  House  from  California  are  doing 
first  rate  except  Piper,  and  he  is  a  damned  hog; 
anyway  you  can  fix  him.  I  wish  you  would  write  a 
letter  to  Luttrell  saying  that  I  say  he  is  doing  first 
rate,  and  is  very  able,  etc.,  and  send  me  a  copy. 

According  to  the  congressional  directories 
Aaron  A.  Sargent  and  Newton  Booth  were 
Senators  from  Cahfornia.  John  P.  Jones 
was  a  Senator  from  Nevada.  CorneHus  Cole 
had  been  a  Senator  from  California  in  the 
Forty-third  Congress.  George  C.  Gorham 
was  Secretary  of    the  Senate.     The  name 


"  George  C.  Gorham  "  appears  in  the  Hunt- 
ington accounts.  George  E.  Spencer  was  a 
Senator  from  Alabama  in  the  Forty-fifth 
Congress.  Gilbert  C.  Walker  was  a  Repre- 
sentative from  Virginia.  William  A.  Piper 
was  a  Representative  from  California.  He 
was  of  radical  views.  By  this  time  it  would 
seem  that  Luttrell  had  been  convinced. 

roscoe  conkling  as  one  of  "  our  best 
friends" 

New  York,  April  27,  1876. 
.  .  .  Scott  has  several  parties  here  that  I  think 
do  nothing  else  except  write  articles  against  the 
Central  Pacific  and  its  managers,  then  get  them 
published  in  such  papers  as  he  can  get  to  publish 
them  at  small  cost,  then  sends  the  papers  every- 
where, and  there  is  no  doubt  but  that  he  has  done 
much  to  turn  public  sentiment  against  us.  If  it 
was  known  that  the  C.  P.  did  not  control  the  S.  P. 
I  think  we  could  beat  him  all  the  time,  although  he 
has  alx>ut  the  same  advantages  over  us  in  Wash- 
ington that  we  have  over  him  in  Sac.  [Sacramento]. 
If  he  wants  some  committeeman  away  he  gets  some 
fellow  (his  next  friend)  to  ask  him  to  take  a  ride 
to  New  York  or  anywhere  else,  of  course  on  a  free 
pass,  and  away  they  go  together.  Then  Scott  has 
always  been  very  lil^eral  in  such  matters.  Scott  got 
a  large  number  of  that  drunken,  worthless  dog 
Piper's  speeches  printed  and  sent  them  broadcast 
over  the  country.  He  has  flooded  Texas  with  them. 
The  Sac.  Record-Union  hurts  us  very  much  by 
abusing  our  best  friends.  There  was  a  no.  [num- 
ber] of  that  paper  came  over  some  little  time  since 
that  abused  Conkling,  Stewart  and  some  other  of 
our  friends,  with  Bristow's  name  up  for  president. 
...  If  I  owned  the  paper  I  would  control  it  or 
bum  it.  .  .  . 

Roscoe  Conkling  was  a  Senator  from  New 
York.  His  name  occurs  in  the  Huntington 
accounts.  William  M.  Stewart  was  a  Sen- 
ator from  Nevada.  Bristow  was  a  prominent 
candidate  for  the  Presidency;  at  the  time  this 
letter  was  written  he  was  Secretary  of  the 
Treasury.  The  Sacramento  Record-Union 
was  at  that  time  called  a  railroad  organ. 

New  York,  May  2,  1876. 
Herewith  I  send  copy  of  telegraphic  dispatch  that 
came  over  yesterday.  Who  is  this  Webster?  Is  it 
not  possible  to  control  the  agent  of  the  Associated 
Press  in  San  Francisco?  The  matters  that  hurt 
the  C.  P.  and  S.  P.  most  here  are  the  dispatches 
that  come  from  S.  F.  (San  Francisco).  Scott  has  a 
wonderful  power  over  the  press,  which  I  suppose  he 
has  got  by  giving  them  free  passes  for  many  years 
over  his  roads.  .  .  . 

New  York,  May  12,  1876. 
...  I  sent  Hopkins  an  article  yesterday  cut 
from  the  Commercial  Advertiser;  *  to-day  I  met  one 
of  the  editors,  Norcutt;  he  told  me  Scott  paid  for 
having  it  published;  that  he  would  not  have  let  it 
gone  into  the  papers  if  it  had  been  left  to  him, 
etc.  .  .  . 

*  This  newspaper  has  passed  into  new  hands  since  the  date  of 
this  letter. 


I    ...... 

^V  ....  I  hope  Luttrell  will  be  sent  back  to  Con- 
egress.  It  would  be  a  misfortune  if  he  were  not. 
Wigginton  has  not  always  been  right,  but  he  is  a 
good  fellow  and  is  growing  every  day.  Page  is 
always  right,  and  it  would  be  a  misfortune  to  Cal. 
not  to  have  him  in  Congress.  Piper  is  a  damned 
hog  and  should  not  come  back.  It  is  shame  enough 
for  a  great  commercial  city  like  S.  F.  to  send  a 
scavenger   like   him   to   Congress  once.  .  .  . 

tNEW  York,  June  12,  1876. 
....  I  notice  what  you  say  of  Wigginton,  Lut- 
ell,  and  Piper.    The  latter  should  be  defeated  at 
almost  any  cost. 

Peter  D.  Wigginton,  of  Merced,  and  Hor- 
ace F.  Page,  of  Placerville,  were  Representa- 
tives from  California  in  the  Forty-fifth  Con- 

^cress. 

^B  June  24,   1876. 

^V  Parrott  (Gorham)  is,  or  was,  writing  a  brief  on 
fares  and  freight  to  influence,  I  was  told,  one  of  the 
Judges  of  the  Supreme  Court.  They  are  sure  to 
do  their  worst  but  my  better  judgment  tells  me  that 
we  cannot  afford  to  take  the  scamps  into  camp. 

^^  New  York,  March  7,  1877. 

^^f  ....  I  notice  you  are  looking  after  the  state 
railroad  commissioners.  I  think  it  is  time.  ...  I 
stayed  on  in  Washington  two  days  to  fix  up  R.  R. 
Committee  in  the  Senate.  Scott  was  there  working 
for  the  same  thing,  but  I  beat  him  for  once,  certain, 
as  the  committee  is  just  as  we  want  it,  which  is  a 
very  important  thing  for  us.  .  .  . 

March  14,  1877. 
....  After  the  Senate  R.  R.  Committee  was 
made  up  Scott  went  to  Washington  in  a  special  train, 
and  got  one  of  our  men  of!  and  one  of  his  on,  but 
they  did  not  give  him  the  com.  Gordon,  of  Georgia, 
was  taken  off,  and  Bogy,  of  Missouri,  put  on. 

John  B.  Gordon,  of  Atlanta,  was  a  Senator 
from  Georgia;  Lewis  V.  Bogy  of  St.  Louis 
was  a  Senator  from  Missouri  in  the  Forty- 
fifth  Congress. 

I  gave  to-day  a  letter  to  Senator  Conover  of 
Florida.  He  is  a  good  fellow  enough  and  our 
friend  after  he  is  convinced  we  are  right. 

Simon  P.  Conover  was  a  Senator  from 
Florida  in  the  Forty-fifth  Congress. 

MILLION    AND    A    HALF   PROFITS    IN    TWO 
MONTHS ! 

New  York,  March  24,  1877. 
.  .  .  You  write:  "Our  receipts  are  not  enough 
to  meet  payrolls  and  imperative  demands  here."  I 
have  no  knowledge  of  what  the  receipts  have  been 
this  month,  but  for  January  and  February,  this 
year,  on  all  our  roads,  they  were  nearly  three  millions 
of  dollars,  which  was  nearly  $400,000  more  than  in 
the  same  months  of  1876,  and  one  half  must  have 
been  profits. 

April  3,  1877. 
....  We  should  be  very  careful  to  get  a  U.  S. 
Senator  from  Cal.  that  will  be  disposed  to  use  us 
fairly  and  then  have  the  power  to  help  us.  Sargent, 
I  think  will  be  friendly,  and  there  is  no  man  in 
the  Senate  that  can  push  a  measure  further  than 
he.  .  .  . 


Scientific  Corruption  of  Politics 


857 


STEPHEN   J.  FIELD.  OF    CALIFORNIA,  JUS- 
TICE   IN    THE    UNITED    STATES    SU- 
PREME COURT  FROM  1863  TO  1897. 

Aaron  A,  Sargent  was  a  Senator  from 
California  in  the  Forty-fifth  Congress. 

New  York,  April  20,  1877. 

I  wrote  Crocker  on  the  12th  inst.  in  relation  to 
Jones'  Los  Angeles  road.  A  few  days  after  I  saw 
Jones  I  met  Gould.  He  told  me  Keene  had  bought 
it  [meaning  the  railroad  at  Los  Angeles  owned  by 
Senator  Jones,  of  Nevada].  Of  course,  I  said  I  was 
glad  to  hear  it,  as  we  did  not  want  the  road  at  any 
price;  that  I  made  Jones  an  offer  for  it  because  we 
wanted  him  to  help  us  with  our  (C.  P.  and  U.  P.) 
sinking  fund  bill  in  Congress,  and  was  very  glad  it 
had  got  (the  railroad)  out  of  the  way,  and  that  I 
saw  nothing  now  to  prevent  friendly  relations  be- 
tween Jones  and  ourselves,  &c. 

On  the  Sunday  following  A.  A.  Selover  came  to 
my  house  and  said  he  came  from  Gould  and  Keene 
and  that  in  the  panic  or  break  in  Panama  a  few  days 
before  Jones  would  have  been  broken  if  G.  and  K. 
had  not  come  in  to  help  him  out,  and  to  do  it  they 
had  to  take  Jones'  railroad,  &c.,  and  he  asked 
me,  after  some  beating  alx)ut,  if  we  wanted  the  road 
at  $480,000.  I  told  him  that  we  did  not  want  it  at 
all  but  that  we  would  take  it  so  as  to  work  in  har- 
mony with  Jones,  and  that  I  had  made  him  an  offer 
as  I  wrote  Crocker,  and  my  impression  was  our 
people  would  do  that  now,  but  I  was  quite  sure  we 
would  rather  G.  and  K.  would  keep  the  road,  if 
by  that  Jones  could  be  made  our  friend,  &c. 
What  do  you  all  think  of  this?  I  am  rather  disposed 
to  think  G.  and  K.  have  not  bought  the  road  but 
hold  it  as  collateral. 

New  York,  May  7,  1877. 

....  I  notice  what  you  say  of  Conover,  the 
Florida  Senator.  He  is  a  clever  fellow  but  don't 
go  any  money  on  him.  .  .  .  The  $70,000  that  I  let 
Jones  have  are  tied  up  for  ten  years.  I  think  we 
can  make  more  than  the  interest  on  the  amount  paid 
for  Jones'  road  out  of  our  other  roads  by  not  run- 
ning the  Jones  road  at  all;  and  Jones  is  very  good- 


858 


Hampton's  Magazine 


naturcd  now  and  we  need  his  help  in  Congress  very 
much;  and  I  have  no  doubt  we  shall  have  it.  We 
must  have  friends  in  Congress  from  the  West  coast, 
as  it  is  very  important,  I  think,  that  we  kill  the  open 
highway,  and  get  a  fair  sinking  fund  bill  by  which 
we  can  get  time  beyond  the  maturity  of  the  bonds 
that  the  government  loaned  us  to  pay  the  indebted- 
ness; and  I  think  if  any  Republican  is  elected  in 
Sargent's  place,  he  (Sargent)  is  worth  to  us,  if  he 
comes  back  as  our  friend,  as  much  as  any  six  new 
men,  and  he  should  be  returned. 

INGALLS   A   "good   FELLOW " 

New  York,  May  15,  1877. 

Yours  of  the  7th  inst.  is  received.  I  am  glad  you 
are  paying  some  attention  to  General  Taylor  and 
Mr.  Kasson.  Taylor  can  do  us  much  good  in  the 
South.  I  think,  by  the  way,  he  would  like  to  get 
some  position  with  us  in  Cal.  Mr.  Kasson  has 
always  been  our  friend  in  Congress  and  as  he  is 
a  very  able  man,  has  been  able  to  do  us  much  good 

and  he  has  never  *  us  one  dollar.     I  think 

I  have  written  you  before  about  Senator  Conover. 
He  may  want  to  borrow  some  money,  but  we  are 
so  short  this  summer  I  do  not  see  how  we  can  let 
him  have  any  in  Cal. 

I  have  just  given  Senator  Ingalls,  of  Kansas,  a 
letter  to  you.  He  is  a  good  fellow  and  can  do  us 
much  good.  .  .  .  Senator  Morton  is  coming  over; 
also  his  brother-in-law,  Burbank.  They  are  good 
fellows,  but  B.  means  business;  not  here  but  in  W. 

Scott  is  working  everywhere  for  his  open  highway, 
but  I  think  we  can  beat  him ;  but  it  will  cost  money. 

The  Congressional  Directory  gives  the 
name  of  Oliver  P.  Morton  as  a  Senator 
from  Indiana. 

June  I,  1877. 

....  There  has  been  quite  a  number  of  Senators 
and  M.  C.  in  the  office  here  in  the  last  few  days;  they 
all  say  Scott  is  making  his  greatest  effort  on  his  Texas 
and  Pacific  (open  highway)  and  most  of  them  think 
he  will  pass  it;  this  man  Hayes,  most  people  say, 
is  for  it  to  conciliate  the  South;  he  may  be,  but  I 
hardly  believe  he  is;  but  I  have  no  doubt  he  is  for 
many  things  he  should  not  be  for.  .  .  . 

The  reference  is  to  President  Hayes. 

New  York,  September  10,  1877. 

Friend  Colton:  ...  As  to  Colonel  Hyde  writ- 
ing a  report  about  the  harbor  of  San  Diego.  I 
would  Hke  such  a  report  as  he  could  write,  and  if 
he  would  write  one  to  suit  for  $250  I  would  give  it, 
and  if  he  would  not  we  shall  have  to  go  without 
it.  .  .  . 

New  York,  October  5,  1877. 

Yours,  No.  15,  is  received.  I  notice  your  remarks 
on  our  matter  in  Cal.  I  have  no  doubt  there  is 
many  things  to  annoy  you.  The  dispatches  about 
crossing  the  Colorado  come  over  very  well.  I  t  ink 
Gould  has  had  as  much  to  do  with  stopping  us  on 
the  bridge  as  Scott  has,  although  I  have  had  no 
reason  for  so  thinking  up  to  this  morning  (see  clip 

♦See  Pacific  Railroad  Commission  Report,  p.  3851.  In  the 
ori<?inal  the  word  left  blank  here  is  said  to  look  like  "  cost."  Some 
authorities  agreed  to  accept  it  as  "lost,"  which  although  it 
seems  to  make  no  sense  had  doubtless  a  more  dulcet  sound  in 
some  ears.  John  A.  Kasson,  of  Des  Moines,  was  a  Representative 
from  Iowa  and  later  United  States  Minister  to  Austria.  John  J. 
Ingalls,  of  Atchison,  was  a  Senator  from  Kans;is. 

"  ScientiGe  Corruption  of  Politics 


from  Tribune),  except  Jim  Wilson,  of  Iowa,  is  their 
man,  and  has  much  influence  with  McCrary. 

Sec.  of  War  was  in  Washington  when  the  first 
order  went  out  to  stop  work  on  the  bridge,  and  Gould 
came  in  twice,  and  Dillon  once,  to  tell  me  that  the 
Sec.  of  the  Interior  had  his  war  paint  on  and  was  to 
attack  us  in  his  message,  etc.,  etc.  I  thought  at  the 
time  they  were  tr}'ing  to  cover  up  something,  and 
rather  supposed  it  was  to  check  us  on  S.  P.  .  .  . 

George  W.  McCrary,  of  Iowa,  was  Secretary 
of  War  in  the  administration  of  Hayes.  Carl 
Schurz  was  Secretary  of  the  Interior  in  the 
same  administration.  The  bridge  was  at  a 
government  reservation,  McCrary  and  Schurz 
stopped  it.  James  Wilson,  of  Traer,  was  a 
Representative  from  Iowa  in  the  Forty-fourth 
Congress.  According  to  "  Who's  Who,"  the 
home  of  James  Wilson,  at  present  Secretary  of 
Agriculture,  is  at  Traer,  Tama  County,  Iowa, 
and  he  was  in  Congress  from  1873  to  1877 
and  from  1883  to  1885. 

New  York,  October  20,  1877. 

....  I  think  Safford  had  better  be  in  Washing- 
ton at  the  commencement  of  the  regular  session,  to 
get  Congress  to  confirm  the  Acts  of  Arizona. 

I  saw  Axtell,  Governor  of  New  Mexico,  and  he 
said  he  thought  if  we  would  send  to  him  such  a  bill 
as  we  wanted  to  have  passed  into  a  law,  he  could 
get  it  passed  with  vet}'  little  or  no  money;  when  if 
we  sent  a  man  there  they  would  stick  him  for  large 
amounts.  .  .  . 

October  30,   1877. 

....  The  committees  are  made  up  for  the  Forty- 
fifth  Congress.  I  think  the  R.  R.  Com.  is  right,  but 
the  Com.  on  Territories  I  do  not  like.  A  different 
one  was  promised  me.  ...  I  think  there  never 
was  so  many  strikers  in  Washington  before. 

"  JIM  "  KEENE  ALSO  READY  TO  PAY  MONEY 

November  g,  1877. 
....  I  do  not  think  we  can  get  any  legislation 
this  session  for  extension  of  land  grants  or  for  chang- 
ing line  of  road  unless  we  pay  more  for  it  than  it  is 
worth.  .  .  .  Some  parties  are  making  great  effort 
to  pass  a  bill  through  Congress  that  will  compel  the 
U.  P.  and  C.  P.  to  pay  large  sums  into  a  sinking 
fund,  and  I  have  some  fears  that  such  a  bill  may 
pass.  Jim  Keene  and  others  of  Jay  Gould's  ene- 
mies are  in  it  and  will  pay  money  to  pass. 

New  York,  November  15,  1877. 
....  If  we  are  not  hurt  this  session  it  will  be 
because  we  pay  much  money  to  prevent  it,  and  you 
know  how  hard  it  is  to  get  it  to  pay  for  such  pur- 
poses. ...  I  think  Congress  will  try  very  hard  to 
pass  some  kind  of  bill  to  make  us  commence  paying 
on  what  we  owe  the  government.  .  .  .  Every  year 
the  fight  grows  more  and  more  expensive.  .  .  . 

New  York,  November  22,  1S77. 
....  Matters  never  looked  worse  in  Washing- 
ton than  they  do  at  this  time.  It  seems  as  though 
all  the  strikers  in  the  world  were  there.  I  send  with 
this  copy  of  one  of  their  letters  I  received  yesterday, 
all  of  the  same  tenor.  The  one  I  send  is  from  ex- 
Senator  Pomeroy. 
"  will  be  continued  on  page  879. 


Scientific   Corruption  of  Politics 


879 


Scientific  Corruption  of  Politics 

Continued  from  pafie  858 


The  inclosure  is  a  letter  of  advice  from 
*onieroy  to  Huntington,  outlining  a  scheme 
^y  which  Congress  could  be  controlled  for 
le  railroad,  and  closing  with  fulsome  ex- 
pressions. For  Pomeroy,  see  Mark  Twain's 
'Gilded  Age";  also  Mr.  Huntington's  ac- 
counts for  1876.  Pomeroy  had  been  a  Sen- 
ator from  Kansas  in  the  Forty-third  Con- 
fess. 

November  24,  1877. 
.  I  notice  what  you  write  of  the  Santa  Mon- 
ica road.  I  am  satisfied  with  that  trade  and  when 
you  write  pay  Jones  no  part  of  the  $25,000,  because 
there  is  an  unsettled  account  of,  say,  $6,000.  I  think 
you  forget  his  position.  I  have  paid  him  the  $25,- 
000  as  he  told  me  he  needed  it  very  much.  Jones 
can  do  us  much  good  and  says  he  will. 

■  December  5,  1877. 

r  .  .  .  I  have  just  received  telegram  from  Wash- 
ington that  Matthews  and  Windom  have  been  put 
on  Senate  R.  R.  Com.  in  place  of  Howe  and 
Ferrj'.  This  looks  as  though  the  Texas  and  P. 
had  control  of  the  Senate  as  far  as  appointing  corns, 
are  concerned.     I  am  not  happy  to-day. 

Stanley  Mathews,  of  Cincinnati,  was  a  Sen- 
ator from  Ohio;  William  Windom,  of  Wi- 
nona, was  a  Senator  from  Minnesota;  Timo- 
thy O.  Howe,  of  Green  Bay,  was  a  Senator 
from  Wisconsin ;  Thomas  W.  Ferry,  of  Grand 
Haven,  was  a  Senator  from  Michigan. 

WHEN    MONEY    WAS    USED    VERY    FREELY 

December  17,  1877. 
.  .  .  The  Texas  and  P.  Company  have  been 
fighting  us  for  years,  but  have  had  but  little 
money,  but  have  used  passes  and  promises  largely; 
but  the  latter,  as  they  say,  is  about  played  out,  and 
some  little  time  ago  they  joined  teams  as  I  am  told, 
with  the  North[em]  P[acific].  They  had  a  little 
money  to  use  as  they  had  no  mortgage  or  floating 
debt  as  I  am  told.  They  have  made  a  little  money 
on  this  end  of  their  road  and  I  think  are  using  it. 
Jay  Gould  went  to  Washington  about  two  weeks 
since  and  I  know  saw  Mitchell,  Senator  from  Ore- 
gon, since  which  time  money  has  been  used  very 
freely  in  Washington  and  some  parties  have  been 
hard  at  work  for  the  T.  &  P. — N.  P.,  that  never 
work  except  for  ready  cash,  and  Senator  Mitchell 
is  not  for  us  as  he  was,  although  he  says  he  is,  but  I 
know  he  is  not.  Gould  has  large  amounts  of  cash 
and  he  pays  it  without  stint  to  carry  his  points.  .  .  . 

John  H.  Mitchell,  of  Portland,  \yasa  Sena- 
tor from  Oregon. 

January  12,   1878. 

.  .  .  Matters  do  not  look  well  in  Washington, 
but  I  think  we  shall  not  be  much  hurt,  although  the 
boys  are  very  hungrj'  and  it  will  cdst  considerably 
to  be  saved. 


January  22,  1878. 
...  The  World  *  again  published  to-day  that 
the  C.  P.  and  S.  P.  [Central  Pacific  and  Southern 
Pacific]  owe  fourteen  millions  floating  debt,  and  it 
hurts  us  very  much,  and  I  don't  see  how  we  can 
carry  our  floating  debt  here  unless  this  debt  can  in 
some  way  be  transferred;  that  is  the  larger  portion 
of  it.  The  World  is  controlled  by  Tom  Scott.  A 
few  months  ago  I  could  have  had  it  in  our  interest, 
by  paying  its  losses,  or  in  other  words,  paying  the 
bills  that  they  (the  World)  could  not  pay,  which 
would  be  from  $2,000  to  $5,000  a  month.  I  did  not 
think  it  wise  to  do  it.  .  .   . 

February  23,  1878. 
.  .  .  The  Sub.  Com.  of  the  R.  R.  Com.  of  the 
House  have  agreed  to  report  Scott's  T.  and  P.  bills 
through  to  San  Diego  and  I  am  disposed  to  think 
the  full  Com.  will  report  it  to  the  House.  It  can  be 
stopped  but  I  doubt  whether  it  would  be  worth  the 
cost.  ...  Scott  no  doubt  will  promise  all  the,  say, 
$40,000,000,  that  the  act  would  give  him.  .  .  . 

(Letter  of  March  4,  1878,  suggested  that  army 
officers  be  let  in  on  the  Oakland  water  front  job.) 

New  York,  May  3,  1878. 
.  .  .  The  Texas  and  Pacific  folks  are  working 
hard  on  their  bill,  and  say  they  are  sure  to  pass  it, 
but  I  do  not  believe  it.  They  offered  one  M.  C. 
one  thousand  dollars  cash  down,  five  thousand 
when  the  bill  passed,  and  ten  thousand  of  the  bonds 
when  they  got  them,  if  he  would  vote  for  the  bill. 

New  York,  June  30,  1878. 
I  think  your  letter  to  McFarland  was  good.  .  .  . 
I  think  in  all  the  world's  history  never  before  was 
such  a  wild  set  of  demagogues  honored  with  the 
name  of  Congress.  We  have  been  hurt  some  but 
some  of  the  worst  bills  have  been  defeated  but  we 
cannot  stand  many  such  Congresses. 

New  York,  September  30,  1878. 
...  I  think  you  are  right  about  Field  not  sit- 
ting in  the  Gallatin  suit.  .  .  . 

Albert  Gallatin  had  been  a  member  of  the 
firm  of  Huntington  &  Hopkins  at  Sacra- 
mento. He  brought  suit  to  prevent  the 
Central  Pacific  from  setting  aside  its  sinking 
fund.  Justice  Stephen  J.  Field  was  of  the 
Supreme  Court  of  the  United  States.  For 
many  years  he  was  actively  supported  in 
some  quarters  for  the  Democratic  nomina- 
tion for  the  Presidency.  'The  California 
State  Democratic  convention  of  1884,  held 
at  Stockton,  considered  charges  against  Jus- 
tice Field  based  upon  his  decisions  in  cases 
wherein  the  Southern  Pacific  Railroad  was 
interested.     As  a  result  of  these  charges  the 

*  This  newspaper  has  undergone  changes  of  editorial  manage- 
ment and  ownership  since  the  date  of  this  letter. 


8.^ 

880                                          Hampton's  Magazine 

convention  formally  read  Justice  Field  out  scribed  in  Mr.  Franklin  Hichborne's  book 

of  the  Democratic  party.  on  that  subject.*    This  is  the  iilfluence  that 

I  have  used  the  past  tense  in  describing  is  determining  to-day  who  shall  be  governor, 

the  political  degradation  of  this  State  of  Cali-  who  shall  fill  every  office  below  him,  who 

fornia,  but  I  might  as  well  have  written  it  in  shall  be  judges. 

the  present.     Forms  have  changed  somewhat  Finally,  this  is  the  influence,  concealed  and 

and  methods;  the  essence  of  the  situation  sinister,  that  stopped  the  graft  prosecution 

remains  the  same.  in  San  Francisco;  that  enabled  Ruef,  Cal- 

Still,  the  huge  political  machine  works  on  houn,  and  Schmitz  to  escape;  that  defeated 

corrupting  and  corrupting.    Still,  the  railroad  Francis  J.  Heney  at  the  polls;  and  morally 

boss  operates  in  every  county,  and  still  the  head  this  is  the  influence  responsible  for  the  hand 

spider  sits  in  his  office  and  spins  his  evil  webs.  that  tried  to  assassinate  him. 

This  is  the  influence  that  brought  to  naught      

the   work    of   the    reformers    in    the   last    Ses-  „'"Story  of  theSe^ion   of  the    California  Legblature,"  by 

1  •      11        J  Franklin  Hichborne,  San  Francisco;  ipog.     It  is  really  a  most 

SlOn    of     the    legislature,    as    graphically    de-  meritorious  work  and  ought  to  be  widely  noted. 


Nora 

By  Arthur  Stringer 

Why  is  it,  now,  me  Nora 
Will  niver  shpake  av  Hugh? 

Will  niver  pass  a  joke  wid  him 
The  way  she  used  to  do? 

Toime  was  that  gurl'd  blather 
Av  Hughie,  noon  and  night! 

Now  iv'ry  toime  he  swings  the  gate 
Her  face  goes  starin'  white! 

I've  spied  no  row  nor  ruction; 

They  meet  as  friend  wid  friend; 
And  still,  I'm  toldt,  he  walks  with  her 

Beyont  the  boreen's  end. 

I've  done  me  best  by  Nora; 

That  gurl's  as  thrue  as  day, 
Wid  all  her  big  and  wishtful  eyes, 

Wid  all  her  bashful  way' 

But  white  before  me  turf-fire 

She  sits  widout  a  word. 
This  gurl  av  mine  who  used  to  sing 

As  mad  as  any  bird! 

Faith,  since  she  lost  her  mother, 

I've  left  that  colleen  free 
To  come  and  go — but  toimes  there  are 

When  men  are  slow  to  see! 

For  wanst  I  spied  her  rockin' 

And  sobbin'  here,  alone — 
Now,  can  there  he  some  throuble  up 

Her  mother  might  've  known? 


\ 


peaking  of  Widows  and  Orphans 

By    Charles    Edward    Russell 

Author  of  "The  Heart  of  the  Railroad  Problem"  ''Beating  Men  to  Make  Them  Good,''  etc. 
Illustrations  by  Clarence  Rowe  and  C.  F.  Peters 

Editorial  Note. — Here  is  perhaps  the  most  vivid  and  dramatic  chapter  of  Mr.  Russell's 
series  on  the  Central  Pacific  Millionaire  Mill.  The  story  told  on  the  witness  stand  by  the 
widow  of  Mr.  Huntington's  "Friend  Colton,"  and  the  story  of  the  settlers  that  lost  their  lives  in 
their  contest  with  the  railroad  power  will  be  found  of  extraordinary  interest  and  significance. 


THE  STRANGE  EXPERIENCES  OF 
MRS.  COLTON 


As  to  the  specific  cause  of  the  increased  cost  of 

living,  President  Taft  to-day  frankly  told  various 

of  his  callers  that  he  was  unable  to  account  for  it. 

— News  Despatch  from  Washington,  December  30, 

11909. 

I 

ON  October  8,  1878,  General  David  D. 
Colton  was  brought  to  his  home  in  San 
Francisco  suffering  from  a  perilous  wound 
that  he  had  received  either  in  some  mysterious 
accident  or  from  somebody's  dagger. 

Mrs.  Colton  was  then  in  New  York.  She 
was  telegraphed  for  and  hastened  homeward 
in  special  trains,  but  could  not  reach  San 
Francisco  until  October  14th,  five  days  after 
her  husband's  death. 

General  Colton  was  in  several  ways  re- 
markable, but  chiefly  as  the  only  man  that 
Collis  P.  Huntington  seemed  to  like  or  in 
whom  he  placed  the  least  confidence.  For 
two  of  his  partners  Huntington  entertained  un- 
disguised contempt,  and  for  the  third  (one  may 
say)  a  kind  of  tolerance;  but  he  seemed  really 
drawn  toward  Colton — in  his  long  career 
almost  the  solitary  instance  of  human  weak- 
ness and  one  that  cost  him  dear. 

In  earlier  days  in  California,  Colton  had 
been  a  rather  picturesque  figure.  He  was 
once  the  sheriff  of  Siskiyou  County  and  in 
that  capacity  had  bravely  withstood  and 
quelled  a  mob.  In  San  Francisco  he  prac- 
ticed law,  did  some  work  for  the  multifarious 
and  usually  shady  enterprises  of  the  Southern 
Pacific,  organized  the  form  of  its  plunder 
that  was  called  the  Rocky  Mountain  Coal  and 


Iron  Company,  and  by  his  superior  clever- 
ness won  Huntington's  reluctant  regard. 

Before  long  he  was  admitted  to  the  partner- 
ship; not,  of  course,  to  all  of  the  good  things 
nor  to  many  of  them,  but  to  choice  bits  that 
made  him  a  millionaire.  Thus  when  the  West- 
ern Development  Company  was  organized,  he 
received  a  one-ninth  share  of  that  precious  con- 
cern; and  he  was  president  of  and  held  much 
stock  in  the  Rocky  Mountain  Coal  and  Iron, 
which  was  then  selling  to  the  Central  Pacific 
at  $8  a  ton  coal  that  ^as  worth  $4  or  less. 

WHEN   THE   WIDOW    RELIED    ON    THE    OLD 
FRIENDS 

General  Colton 's  will  left  everything  to 
Mrs.  Colton,  who  was  appointed  sole  execu- 
trix. She  had  known  almost  nothing  about 
his  business  and  she  was  greatly  prostrated 
by  his  sudden  death ;  but  with  confidence  she 
relied  upon  his  late  associates,  who  had  been 
his  and  her  dear  friends.  As  she  wrote  to 
Mr.  Huntington  in  the  early  days  of  her 
affliction,  ''I  know  that  you  and  Mr.  Crocker 
will  advise  and  take  care  of  the  wife  of  David 
D.  Colton."  Particularly  to  her  near  neigh- 
bor, Charles  Crocker,  she  looked  for  gui- 
dance, because  the  families  had  been  very 
intimate.  When  Mr.  and  Mrs.  Crocker  went 
to  Europe,  Mrs.  Colton  took  the  two  oldest 
Crocker  boys  into  her  household  as  if  they 
were  her  own  children.* 

When  General  Colton  died — or  was  killed 
— Mr.  Crocker  was  on  his  way  home  from 
abroad.  He  spent  a  few  days  in  New  York 
and  conferred  there  with  Mr.  Huntington. 

*  Colton  versus  Stanford  el  al.,  testimony,  pp.  2485-90. 


79 


80 


Hampton's  Magazine 


On  the  night  of  his  arrival  in  San  Francisco, 
Mrs.  Colton  saw  with  great  rehef  his  carriage 
drive  up  to  his  door,  and  at  once  sent  him  a 
note  asking  him  to  come  to  see  her.  He  ex- 
cused himself  for  that  night,  but  visited  her 
the  next  morning  and  wept  as  he  dwelt  upon 
General  Colton's  splendid  qualities,  and  his 
own  and  Mrs.  Colton's  great  loss,  by  which 
he  seemed  to  be  greatly  affected. 

Meanwhile,  Mr.  Charles  E.  Green,  Gen- 
eral Colton's  secretary,  had  prepared  for  Mrs. 
Colton  an  inventory  of  the  estate.  It  showed 
possession  of  the  following  securities:  * 

.^08  shares  Rocky  Mountain  Coal  and  Iron  stock. 
10,000  shares  Occidental  and  Oriental  Steamship 

Company  stock. 
20,000  shares  Central  Pacific   Railroad   Company 

stock. 
34,000  shares  Southern  Pacific  stock. 
5,555§  shares  ,  Western     Development     Company 
slock. 
749  shares  Amador  Branch  Railroad  stock. 
Ill  shares  Berkeley  branch  Railroad  stock. 
2,640  shares  California  Pacific  stock. 
556  shares  Colorado  Steam  Navigation  stock. 
650    First    Mortgage    Southern    Pacific    bonds, 

$1,000  each. 
100  First  Mortgage  Southern  Pacific  bonds,  $500 
each. 
75  First  Mortgage  Amador  Branch  bonds. 
II  First  Mortgage  Berkeley  Branch  txinds. 
3  Los  Angeles  County  Bridge  bonds. 

In  a  few  days  Mr,  Crocker  called  again, 
and,  as  Mrs.  Colton  said  afterwards,  she  was 
impressed  with  a  great  change  in  his  manner. 
Apparently  he  had  mastered  his  grief  for  his 
dead  friend  and  his  lips  found  no  more  words 
of  condolence  for  the  widow.  On  the  con- 
trary, he  was  stern  and  severe.f  He  said 
austerely  that  General  Colton  had  left  his 
affairs  much  confused;  that  he  was  in  debt 
to  his  associates  and  to  the  companies  with 
which  he  had  been  connected;  that  many  of 
the  securities  in  his  estate  had  been  obtained 
by  means  of  a  dividend  of  the  Western 
Development  Company;  J  that  this  dividend 
had  been  improperly  declared  by  General 
Colton  without  warrant,  and  that  all  persons 
sharing  in  that  dividend  would  be  obliged  to 
return  the  securities  received  from  it. 

"We  are  going  to  return  our  dividends," 
he  concluded,  "and  as  you  have  got  to  return 
yours  you  had  better  do  so  to-day — before 
night.     Will  you?"  § 

*  Many  of  these  securities  can  be  traced  by  reference  to  the 
Pacific  Railroad  Commission  Report,  testimony  of  Doughty,  p. 
3256. 

t  Colton  versus  Stanford  el  al.,  testimony,  pp.  2485-90. 

i  I  take  this  to  be  the  dividend  of  September  4.  1877,  de- 
scribed in  a  previous  article.  More  than  a  year  seems  to  have 
elapsed  before  the  discovery  that  the  securities  must  be  returned 
— and  by  the  way,  they  never  were  returned. 

§  Colton  versus  Stanford  el  al.,  testimony,  p.  2792. 


Mrs,  Colton,  being  much  taken  aback, 
said  she  would  seek  advice  and  decide  what  J 
to  do,  Mr,  Crocker  went  on  that  GeneralJ 
Colton,  a  short  time  before  his  death,  hac 
subscribed  for  30,000  shares  of  a  new  issiK 
of  Southern  Pacific  stock.  This  stock,  Mr 
Crocker  said,  would  be  heavily  assessed  tq 
build  the  road.*  Of  course,  he  said,  she 
would  not  wish  to  pay  the  assessments  anc 
she  had  better  cancel  the  subscription  ai 
once.  She  made  haste  to  say  that  she  cer- 
tainly would,  and  he  went  his  Way.f 

A  few  days  later  he  returned  and  his  man- 
ner was  still  more  forbidding.  He  said  (ac- 
cording to  Mrs.  Colton)  that  the  Western 
Development  Company  was  insolvent,  heav- 
ily in  debt,  and  must  have  the  return  o: 
all  the  securities  included  in  that  impropei 
dividend  to  which  he  had  before  referred 
that  General  Colton  owed  his  late  associates 
$1,000,000,  for  which  he  had  deposited  a 
collateral  20,000  shares  of  Central  Pacific 
and  20,000  shares  of  Southern  Pacific  stock," 
but  that  the  value  of  the  collateral  would  not 
cover  the  face  of  the  note;  that  the  408  shares 
of  Rocky  Mountain  Coal  and  Iron  in  Gen- 
eral Colton's  effects  really  belonged  to  hi.s 
four  associates,  being  held  in  trust  for  them; 
and  finally,  that  General  Colton  proved  to  be 
greatly  in  debt  to  all  the  companies.  He  de- 
manded a  settlement  of  all  these  claims  and 
told  her  if  she  wished  she  could  have  them 
verified  by  her  personal  counsel. 

CHARGES  AND  COUNTER  CHARGES 

Now,  Mrs.  Colton's  personal  counsel  was, 
of  course,  her  husband's  personal  counsel, 
who  was  Mr.  Samuel  M,  Wilson,  whom  Mr. 
Crocker  had  highly  recommended.  Mr, 
Wilson  was  also  one  of  the  Central  Pacific's 
regular  and  trusted  attorneys  and,  according 
to  subsequent  testimony,  in  receipt  of  a  salary 
of  $12,000  a  year  from  the  railroad  com- 
pany. §  Mrs,  Colton  had  already  sought 
this  gentleman's  advice.  She  told  Mr. 
Crocker  she  would  be  guided  by  Mr.  Wilson. 

Mr,  Crocker's  manner  on  this  visit  was  so 


*  It  is  singular,  but  I  can  find  no  indication  anywhere  that 
this  stock  was  ever  assessed,  and  certiinly  there  was  not  the 
•lightest  reason  why  it  should  be.  As  for  the  building  of  tho 
road,  that,  as  we  have  previously  seen,  was  provi  led  out  of. 
the  earnings  and  sinking  fund  ((  the  Cenlnil  P;:c  fir  and  out  of 
the  Western  Development  and  Pacific  Improvement  Companies. 

t  Colton  versus  Stanford  et  al.,  testimony,  p.  2797. 

t  In  1877  Central  Pacific  paid  8  per  cent  dividends.  Neither 
Central  Pacific  nor  Southern  Pacific  was  on  the  market,  both 
being  closely  held  by  Mr.  Stanford  and  his  friends.  An  8  per 
cent  stock  ought  to  be  worth  at  least  80,  at  which  price  Gen- 
eral Colton's  Central  Pacific  collateral  would  be  worth  $1,600.- 
000  without  considering  the  Southern  Pacific  stock,  which  is 
now  worth  137. 

§  Colton  V  rsus  Stanford  et  al.,  testimony,  p.  6626. 


8i 


82 


Hampton's  Magazine 


disagreeable  and  the  widow  was  now  so  thor- 
oughly alarmed  that  when  he  sent  word  of 
his  next  call  she  thought  it  well  to  have  some 
women  friends  about  her,  and  thus  avoided 
the  discussion  of  business.  Mr.  Crocker  did 
not  come  again  and  she  never  spoke  with  him 
thereafter. 

Mr.  Wilson  was  now  presumably  investi- 
gating General  Colton's  affairs.  After  a 
time,  he  informed  Mrs.  Colton  that  the  situa- 
tion was  far  worse  than  Mr.  Crocker  had 
pictured  it.  General  Colton  was  not  only 
heavily  in  debt  to  the  companies  he  repre- 
sented, but  his  associates  charged  him  with 
repeated  acts  of  embezzlement.  They  had 
told  Wilson  (he  said)  that  all  the  securities 
in  the  estate  would  not  suffice  to  pay  the 
General's  debts;  that  they  held  enough 
claims  to  take  from  Mrs.  Colton  *  everything 
she  had,  including  her  home;  and  they 
threatened,  in  a  manner  "stem  and  severe 
and  determined  and  implacable,"  that  unless 
she  made  a  settlement  and  surrendered  her 
stocks  and  bonds  they  would  make  public 
her  husband's  criminal  acts  and  blacken  his 
name  and  memory. 

Mr.  Wilson  was  good  enough  to  say  that 
he  did  not  believe  these  charges,  but  the  rail- 
road company  had  all  the  books  and  records 
and,  therefore,  to  prove  General  Colton's  in- 
nocence would  be  impossible. t  Hence  the 
best  plan  was  to  make  terms  with  the  asso- 
ciates.    Mrs.  Colton  was  greatly  distressed. 

Her  misery  was  somewhat  lightened  when 
Mr.  Wilson  suggested  that  she  employ  a 
mediator,  who,  because  of  his  ability  and 
experience,  was  likely  to  secure  some  con- 
cession. The  helping  hand  thus  in  her  dark 
hours  extended  to  the  widow  was  the  hand 
of  Mr.  Lloyd  Tevis,  who,  Mr.  Wilson  said, 
would  be  just  the  man.  Mr.  Tevis  is  not 
unknown  in  these  annals,  having  been  the 
originator  of  the  ingenious  plan  whereby 
the  Big  Four  got  possession  of  Wells,  Fargo 
&  Co., J — of  which  branch  of  the  Big  Four's 
activities  he  was  now  the  president. 

Mr.  Tevis  made  what  he  called  an  investi- 
gation and  reported  (according  to  Mrs.  Col- 
ton) that  General  Colton's  debt  was  of  great 
magnitude  and  the  Western  Development 
Company  was  insolvent,  but  Messrs.  Stan- 
fordj  Huntington,  and  Crocker  had  been  in- 
duced to  make  a  concession  to  the  widow 
of  their  old  friend.     She   must   deliver  to 


them  all  the  securities  that  were  in  contro- 
versy, but  200  of  the  Southern  Pacific  bonds 
might  be  deposited  with  Wells,  Fargo  &  Co., 
and  from  these  she  might  for  ten  years  draw 
the  interest. 

In  other  words,  they  granted  her  a  pension 
for  ten  years. 

Of  the  rest  of  the  fortune  they  made  a 
thorough  job.'  They  even  insisted  that  50 
shares  of  Southern  Pacific  that  General  Col- 
ton had  given  to  his  daughter  as  a  wedding 
present  should  be  returned  to  them  *  and  that 
Mrs.  Colton  should  surrender  uncut  interest 
coupons  amounting  to  $6,000. 

The  two  men  in  whom  she  had  most  con- 
fidence, Wilson  and  Tevis,  having  thus  as- 
sured her  that  no  other  way  could  be  found 
from  the  sorry  situation,  she  was  almost  per- 
suaded to  surrender.  On  the  morning  of 
August  27,  1879,  she  still  hesitating,  word 
was  sent  to  her  that  Mr.  Huntington  was 
about  to  return  to  New  York,  that  he  would 
leave  that  afternoon  at  3  o'clock,f  and  unless 
she  signed  the  settlement  before  that  time 
the  Big  Four  would  make  no  terms  with  her. 
Thus  menaced,  she  brought  herself  to  sign 
an  instrument  by  which  she  accepted  thj 
terms  demanded,  and  surrendered  all  her 
securities.  The  200  Southern  Pacific  bonds 
were  delivered  to  Wells,  Fargo  &  Co.,  who 
refused  to  give  her  any  receipt  for  them. 
She  also  executed  a  release  for  $304,060.33 
which  the  Western  Development  Company 
had  owed  to  her  husband. 

On  their  part  the  Big  Four  canceled  the 
note  for  $1,000,000  held  by  them  against 
General  Colton,  and  agreed  to  keep  secret 
the  charges  of  embezzlement. 

MRS.    COLTON    SUSPECTS    FRAUD 

Mrs.  Colton  knew  very  little  about  busi- 
ness, but  she  was  intelligent,  and  she  felt 
intuitively  that  there  had  been  fraud  J  in 
these  transactions  although  she  knew  not 
wherein  it  lay.  One  day,  some  months  after 
she  had  been  impoverished  in  this   masterly 


*  Colton  versus  Stanford  et  al.,  testimony,  p.  2812. 

t  Ibid.,  pp.  2523-7. 

t  Pacific  Railroad  Commissioa  Report,  p.  3116. 


*  Colton  v^sus  Stanford  et  al..  testimony,  p.  2820. 

t  As  a  matter  of  fact,  Mr.  Huntington  did  not  leave  San  Fran- 
cisco that  afternoon  nor  until  September  8th,  twelve  days  later. 

t  QnESTiON.  You  signed  this  paper  and  yet  you  say  you 
rebelled  against  it? 

Answer.     Because  I  saw  no  justice  in  it. 

Q.     What  was  the  injustice? 

A.     Robbery. 

Q.     A  robbery?     How  was  it  robbery? 

A.  It  simply  had  arrived  at  the  point  that  it  was  my  money 
or  my  life. 

Q.    Isn't  that  a  rather  strong  way  of  putting  it? 

A.  I  think  not.  I  was  in  the  condition  of  a  man  attacked 
by  a  highwayman  upon  the  roadside. 

Colton  versus  Stanford  et  al.,  cross  examination  of  Mrs.  Ellen 
M.  Colton,  to  be  found  in  the  record,  p.  2816. 


Speaking  of  Widows  and  Orphans 


83- 


fashion,  she  was  reading  a  newspaper  and 
ler  eyes  fell  upon  an  inventory  of  the  estate 
)f  Mark  Hopkins,  recently  deceased.  She 
loticed  in  the  list  many  securities  of  the 
:ind  she  had  surrendered,  and  that  the  value 
3f  these  given  in  the  list  was  very  much 
reater  than  the  prices  at  which  the  same 
jcurities  had  been  estimated  in  her  enforced 
settlement. 

This  set  her  to  thinking  and  the  more  she 
reviewed  her  experience  the  clearer  grew  her 
conviction  that  she  had  been  wronged.  She 
abandoned  Mr.  Wilson  as  her  counselor  and 
sought  other  advice.  Her  new  attorney,  Mr. 
G.  Frank  Smith,  set  on  foot  an  investigation 
and  obtained  therefrom  results  that  greatly 
astonished  him. 

For  example,  the  schedule  of  the  insolvent 
Western  Development  Company  that  Wilson 
said  he  obtained  from  the  Big  Four  or  their 
agents  asserted  an  indebtedness  by  the  com- 
pany of  $11,910,030.44  as  follows:* 

To  Charles  Crocker $2,219,541.73 

"   Leiand  Stanford 1,763,734.85 

"   Mark  Hopkins ....   4,087,692  .  10 

"   C.P.Huntington 3,519,701.43 

"   D.  D.  Colton. . .    3191360.33 

This  and  no  more.  No  mention  was  made 
of  the  fact  that  these  five  men  were  the  sole 
owners  of  the  company;  that 
not  one  of  them  had  ever  paid 
in  one  cent  for  his  stock;  that 
they  then  owed  the  company 
$5,000,000,  nor  that  the  com- 
pany's alleged  indebtedness 
represented  only  the  securities 
and  moneys  that  had  been  ad- 
vanced in  their  names  from 
the  Central  Pacific  and  other 
funds  for  its  devious  and 
crooked  operations,  and  for 
which  they  knew  they  would 
shortly  be  repaid  about  five- 
fold, f 


Mr.  Smith  v\as  further  informed  that  in  the 
list  of  assets  in  this  amazing  schedule  were 
most  glaring  omissions.  Thus  no  mention 
whatever  was  made  of  these  items  that  should 
have  been  included :  * 

$462,000  due  from  the  Northern  Railroad  and  sub- 
sequently paid  in  bonds. 

$748,000  due  from  the  Northern  Railroad  in  other 
items  and  a  little  later  paid  in  bonds. 

$7,340.32  due  for  California  Pacitic  stock. 

$92,640  due  from  the  San  Pablo  &  Tulare  Railroad. 

$3,753  from  the  Pacific  Improvement  Company. 

$5,766.15  interest  due  on  Northern  Railroad 
bonds. 

$36,437.03  interest  due  on  San  Pablo  &  Tulare 
bonds. 

$4,986.07  interest  due  on  San  Francisco,  Oakland 
&  Alameda  bonds. 

The  schedule  also  set  down  as  a  worthless 
asset  $832,800  due  from  the  Los  Angeles  & 
San  Diego  Railroad:  Mr.  Smith  was  assured 


Some  of  it,  like  the  six  coaches  sent,  I  know  are  for  the  S.  P. 
(Southern  Pacific),  but  just  whether  they  are  to  be  charged  to 
the  S.  P.  or  the  Western  Development  Co.  I  do  not  know." 
In  other  letters  he  complains  of  the  enormous  floating  debt 
of  the  Central  Pacific  that  this  system  was  piling  up.  "Our 
liabilities  (Central  Pacific)  are  getting  very  large  here  for  a 
company  with  such  large  receipts  and  with  no  apparent  outlay 
except  interest  on  bonded  debt  and  operating  expenses."  In 
his  letter  of  March  24,  1877.  he  figures  the  profits  of  the  Central 
Pacific  at  $750,000  a  month.  Tnese  were  bein^  used  to  pay 
for  the  building  of  the  Southern  Pacific,  rendenng  both  stock 
and  bonds  of  that  road  "velvet"  for  the  fortunate  projectors. 

*  These  and  many  others  are  to  be  found  in  the  testimony, 
pp.  2623-ji. 


*  Colton  versus  Stanford  et  al.,  defend- 
ants' exhibit  E. 

t  The  exact  nature  of  these  operations 
has  been  sufficiently  described  in  a  fore- 
going article,  but  I  may  remind  the  reader 
here  that,  according  to  the  testimony  be- 
fore the  Pacific  Railroad  Commission,  the 
Southern  Pacific  was  built  out  of  the  di- 
verted earnings  and  sinking  fund  of  the 
Central  Pacific.  The  Southern  Pacific 
was  on  through  business  a  parallel  line 
that  had  the  same  owners  and  owed  the 
government  nothing.  The  money  that 
built  it  should  have  gone  to  pay  the  Cen- 
tral Pacific'^  debt  to  the  national  treasury. 
Curious  collateral  testimony  about  all  this 
exists  in  the  Colton  letters  of  Mr.  Hunt- 
ington. In  the  letter  of  May  8,  1875,  Mr. 
Huntington  says:  "All  the  material  I  buy 
here  is  paid  for  by  the  Central  Pacific. 


A   FEW    DAYS    MR.    CROCKER   AGAIN    CALLED   ON    MRS. 
COLTON,   BUT   HIS  LIPS   FOUND   NO    MORE   WORDS        •'■ 
OF   CONDOLENCE   FOR   THE   WIDOW. 


84 


Hampton's  Magazine 


that  within  a  year  this  debt  was  paid  in  good 
bonds  and  stocks.  Another  debt  of  $45,- 
640.53  carried  in  the  schedule  as  a  worthless 
asset  had  already  been  paid  in  gold.  The 
Los  Angeles  &  Independence  Railroad  was 
put  down  as  worth  $100,000  when  $300,000 
appeared  to  have  been  paid  for  it,  and  since 
its  purchase  it  had  returned  $114,318  in  divi- 
dends. The  Colorado  Steam  Navigation  Com- 
pany was  entered  as  an  asset  of  $150,000, 
whereas  in  the  last  three  years  previous  to 
the  making  of  the  schedule  this  company  had 
paid  $iio,coo  in  dividends.  On  the  other 
hand,  in  the  liabilities,  an  item  of  indebted- 
ness entered  at  $298,208.35,  should  have 
been  $269,415.73,  and  there  were  other  ap- 
parent inaccuracies  that  might  be  thought 
very  surprising  in  a  statement  emanating 
from  a  business  enterprise  of  such  magnitude 
and  standing. 

According  to  the  information  gathered  by 
Mr.  Smith,  many  other  goodly  items  were 
missing  from  the  assets,  such  as  Iowa  county 
bonds,  Sioux  City  &  Pacific  bonds  and  the 
like,  and  no  mention  was  made  of  such  pos- 
sessions as  the  contract  to  extend  the  San 
Pablo  &  Tulare  road  forty-six  miles  at  $25,- 
000  a  mile  in  bonds  and  $40,000  a  mile  in 
stock  (actual  cost  of  construction  less  than 
$20,000  a  mile),*  nor  of  other  contracts  and 
items. 

A  SPEEDY  REORGANIZATION  OF  THE  WESTERN 
DEVELOPMENT   COMPANY 

It  appeared  further  that  none  of  the  other 
beneficiaries  of  the  Western  Development 
Company's  dividend  had  returned  any  of 
his  stocks  and  bonds,  but  on  the  contrary, 
twenty-two  days  after  General  Colton's 
death,  these  men  had  wound  up  the  Western 
Development  Company  (which  they  con- 
trolled) and  organized  in  its  place  the  Pacific 
Improvement  Company,  of  which  they  alone 
were  owners.  They  then  transferred  to  the 
new  company  all  of  the  Western  Develop- 
ment Company's  possessions  and  contracts, 
by  which  device  they  froze  out  all  the  Colton 
interests.  From  the  operations  of  the  Pacific 
Improvement  Company  they  derived  by  the 
end  of  1882,  $20,000,000  which  they  had 
divided  among  themselves,  although  if  Gen- 
eral Colton  had  lived  he  would  certainly  have 
had  a  share. 

Furthermore,  the  investigation  seemed  to 

*  Most  of  this  amazing  revelation  of  the  inside  history  of  the 
concern  seems  to  have  been  obtained  from  a  discharged  em- 
ployee. As  it  was  never  seriously  controverted  I  am  obliged  to 
supp>ose  it  to  be  correct. 


show  that  the  charge  of  "embezzlement"  was 
absurd  and  the  claim  of  debt  almost  as 
tenuous. 

The  total  debt  alleged  against  Colton  was 
made  up  of  $666,000,  his  share  of  the  "insolv- 
ent" Western  Development  Company  debt; 
$160,000  he  had  "embezzled";  $125,000  due 
to  the  companies  he  had  managed;  and  the 
$1,000,000  note  secured  by  collateral. 

But  it  appeared  that  there  had  been  paid 
on  the  $1,000,000  the  sum  of  $250,000,  so 
that  the  debt  was  $750,000  instead  of  $1,000,- 
000.  The  embezzlement  charge  when  sifted 
down  had  no  more  excuse  than  this,  that  Col- 
ton had  drawn  from  the  company  money  with- 
out returning  vouchers.*  But  it  appeared  that 
all  of  the  partners  had  done  this;  indeed,  the 
whole  concern,  when  the  light  was  thrown 
upon  it,  looked  like  a  riot  of  perquisites, 
"melons,"  "benefits,"  and  other  good  things 
of  the  kind.  Mark  Hopkins  had  drawn  from 
the  Southern  Pacific  on  September  30,  1871, 
$151,560.59  and  no  accounting  was  made  of 
this  sum  until  1880,  two  years  after  his 
death.  Mr.  Huntington  when  in  New  York 
drew  from  the  Western  Development  appar- 
ently at  his  will  and  never  returned  any 
voucher.  In  three  years  he  had  drawn  $400,- 
000.  Governor  Stanford  took  out  $45,638.84 
without  explanation.  Mr.  Crocker,  without 
warrant  or  apparent  authority,  took  from 
the  treasury  500  Southern  Pacific  bonds  to 
buy  the  Oakland  water  front.  It  seemed  a 
fair  contention  that  if  Colton  was  an  em- 
bezzler, these  men  were  embezzlers  no  less.f 

As  for  Colton's  share  of  the  alleged  indebt- 
edness of  the  alleged  insolvent  Western  De- 
velopment Company,  it  appeared  from  the 
information  that  there  was  no  true  indebted- 
ness and  the  company  was  not  insolvent  at  all 
but  fat  with  rich  assets  that  never  had  been 
divided.!  From  its  organization  to  Colton's 
death  it  had  shared  among  its  stockholders 
$21,000,000.  At  Colton's  death  it  had  on 
hand,  as  the  investigation  revealed,  $22,810,- 
500.43  subject  to  claims,  real  and  imaginary, 
of  $11,316,497-22. 

In  payment  of  these  debts  that  did  not 
exist,  there  seemed  to  have  been  taken  from 

♦There  was  an  allegation  that  he  had  desposited  for  the 
company  $228,618.47  in  silver  and  then  obtained  credit  for  his 
own  benefit  on  a  pretense  that  the  deposit  was  in  gold.  This 
was  never  established,  but  even  if  it  were  true  it  was  not  signifi- 
cant, because  such  seemed  to  be  the  custom.  The  Central 
Pacific  had  done  the  same  thing  with  $2,000,000  of  silver. 
Colton  versus  Stanford  et  al.,  testimony,  p.  2741- 

t  Colton  V  rsus  Stanford  et  al.,  testimony,  pp.  2638-30. 

t  It  may  be  interesting  to  note  that  as  brought  out  in  the 
trial  the  "Nob  Hill"  palaces  of  Stanford,  Hopkins,  and  Crocker 
were  built  out  of  the  Western  Development  Company.  Col- 
ton versus  Stanford  el  al.,  testimony,  p.  8877. 


I 


FOR   MRS.   COLTON,  THE   NET  RESULT   OF  HER  SUIT. WAS  A  HEAVY  BILL  OF  COSTS— MR. 
HUNTINGTON  HAD  CRUSHED  THE  WIDOW  OF  HIS  OLD  FRIEND. 


Mrs.  Colton  securities  at  much  less  than 
their  real  value.  Her  Southern  Pacific  bonds, 
for  instance,  were  scheduled  in  her  settlement 
at  60,  while  in  March  of  the  same  year  they 
had  sold  at  100,  and  at  the  time  of  the  settle- 
ment were  traded  in  by  the  Big  Four  at  94. 
The  Rocky  Mountain  stock  they  appraised 
from  her  at  $16.24  a-  share  must  have  been 
worth  about  par.*    And  so  on. 

MRS.    COLTON    APPEALS    VAINLY    TO    LELAND 
STANFORD 

Upon  the  discovery  of  these  and  many  other 
allegations  of  a  like  nature,  Mr.  Smith  ad- 
vised Mrs.  Colton  to  bring  suit  at  once  for 
the  annulling  of  her  contract  and  the  return 
of  her  securities.  Mrs.  Colton  still  clung  to 
a  belief  in  the  sincerity  of  one  of  the  men 
that  had  professed  so  much  affection  for  her 
husband.  With  the  large,  bland,  unctuous 
sentiments  of  Leland  Stanford  she  was  un- 
able to  reconcile  the  idea  of  despoiling  the 
defenseless,  and  she  wished  an  appeal  to  be 
made  to  his  sense  of  justice. 

Mr.  Smith  had  other  \'iews.  For  some 
time  he  had  been  attentively  considering  the 
sense  of  justice  possessed  by  these  men  and 
had  acquired  of  it  a  very  low  estimate.     He 

♦Pacific  Railroad  Commission  Report,  testimony  of  Leland 
Stanford,  p.  2938. 


told  Mrs.  Colton  that  an  appeal  to  any  of 
them  was  quite  useless.  Nevertheless,  she 
insisted,  and  on  March  ii,  1882,  he  wrote 
to  Leland  Stanford  outlining  Mrs.  Colton's 
story,  her  confidence  in  the  goodness  and 
justice  of  her  old  friend,  and  her  plea  that 
she  be  not  utterly  plundered.  Mr.  Smith 
closed  with  this  comment: 

"Knowing  how  repugnant  uncontested 
settlements  are  to  your  associates,  I  have 
acted  in  the  premises  contrary  to  my  own 
belief  of  any  possible  advantage  that  can 
accrue  to  her  from  this  or  any  other  amicable 
overtures  on  her  part."  * 

To  this  letter  no  answer  was  returned. 
The  fact  did  not  astonish  Mr.  Smith  and,  one 
may  think,  need  not  have  astonished  Mrs. 
Colton.  Later  she  recalled  an  incident  that, 
upon  a  more  suspicious  nature,  might  have 
acted  to  prevent  the  writing  of  such  a  letter. 
General  Colton's  office  had  been  in  the  rail- 
road company's  building  and  in  a  safe  in 
that  office  were  still  kept  all  of  the  securities 
belonging  to  the  estate.  According  to  her 
subsequent  testimony,f  Governor  Stanford 
came  into  this  office  one  day  and  found  there 
Mr.  Green,  who  had  been  Colton's  secretary. 
The  safe  was  open. 

*  Colton  versus  Stanford  el  al.,  testimony,  pp.  2607-8. 
+  Ibid.,  p.  2905. 


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Hampton's  Magazine 


Governor  Stanford  remarked  to  Mr. 
Green  that  he  was  very  anxious  about 
the  security  of  the  property  in  that  safe. 
He  said  that  the  art  of  safe-blowing  had 
been  so  developed  that  a  safe-blower 
could  open  such  a  safe  even  in  a  building 
where  there  were  watchmen.  He  thought 
General  Colton's  property  should  be  re- 
moved to  a  safer  place,  and  suggested  that 
such  a  place  would  be  the  vault  of  the  rail- 
road company.  Mr.  Green  reported  this 
conversation  to  the  Widow  Colton.  She  tes- 
tified that  she  acted  at  once  upon  Governor 
Stanford's  suggestion;  but  the  safer  place  to 
which  she  transferred  the  property  was  not 
the  railroad  company's  vault,  but  a  box  in  a 
safety  deposit  company's  care. 

On  May  21,  1882,  Mrs.  Colton's  suit  was 
filed  in  San  Francisco.  The  answer  of  the 
defendants*  was  a  general  denialof  the  bill  of 
complaint,  a  definite  assertion  of  Colton's 
embezzlements  and  defalcations,  an  astound- 
ing reiteration  of  the  insolvency  of  the  West- 
ern Development  Company,  and  a  plea  that 
the  statements  made  to  Mrs.  Colton  were 
made  in  good  faith  and  on  credible  informa- 
tion. 

The  defendants  demurred  to  some  points 
in  the  plaintiff's  bill,  and  Judge  Hunt 
promptly  overruled  the  demurrer.  Where- 
upon counsel  for  Stanford  et  al.  secured  the 
removal  of  the  case  to  the  Sonoma  County 
Court  at  Santa  Rosa.  It  came  to  trial  in 
November,  1883,  before  Judge  Jackson  Tem- 
ple, a  jury  being  waived. 

Judge  Temple  was  afterwards  a  member  of 
the  California  Supreme  Court. 

After  the  usual  manner  of  things  dis- 
agreeable to  the  railroad  company,  the 
fifteen  volumes  of  testimony  taken  in  the 
case  have  mysteriously  vanished  from 
the  court  records  at  Santa  Rosa,  but  I 
succeeded  in  finding  copies  at  Sacra- 
mento and  can  unreservedly  commend 
their  perusal   to   anyone   that   cares  to 


*  They  did  not  mention  their  real  defense,  which,  though 
inadmissible  as  a  plea  in  a  court  of  justice,  was  not  without 
merit,  at  least  from  their  point  of  view.  It  was  this:  Messrs. 
Stanford,  Huntington.  Hopkins,  and  Crocker  had  desired  to 
avail  themselves  of  General  Colton's  superior  cunning  and 
cleverness.  The_  securities  they  bestowed  upon  him  were  merely 
the  wages  for  his  services.  When  they  were  deprived  of  his 
services  they  did  not  purpose  to  continue  the  wages.  For  the 
most  pa.tt  the  securities  represented  no  investment.  They  were 
merely  manufactured  by  the  Big  Four  at  their  convenience  and 
for  their  profit.  All  were  liens  upon  the  enterprise  and  carried 
substantial  interest,  and  the  Big  Four  could  see  no  reason  why 
property  manufactured  in  this  way  should  be  enjoyed  by  Gen- 
eral Colton's  estate  after  they  had  ceased  to  derive  anything 
from  General  Colton's  wits. 

The  substance  of  this  argument  was  frankly  stated  by  Mr. 
Crocker  to  Mr.  Wilson  and  will  be  found  in  the  testimony, 
Ellen  M.  Colton  versus  Leland  Stanford  et  al.,  at  p.  2841. 


know  the  true  manner  in  which  the  rail- 
roads of  the  United  States  have  been 
conducted  or  how  far  (under  present 
conditions)  men  will  go  for  the  sake  of 
money  and  the  power  that  abides  in 
money.  In  these  respects  I  know  of  no 
other  volumes  of  equally  impressive  in- 
struction. Whoever  reads  them  will  face 
the  primitive  human  passions  made  so 
naked  and  real  before  him  that  he  will 
seem  to  himself  to  have  dipped  backward 
into  the  jungle. 

JUDGE    TEMPLE    DECIDES    AGAINST    MRS. 
COLTON 

On  October  8,  1885,  Judge  Temple  filed 
his  opinion.  It  cleared  General  Colton's 
name  from  the  embezzlement  charge,  but 
held  on  almost  all  other  points  for  the  de- 
fendants, in  some  instances  adopting  the  very 
language  of  their  answer.  The  chief  ground 
of  the  decision  seemed  to  be  that  Mrs.  Col- 
ton's contract  was  sound  in  law,  made  by 
her  in  full  knowledge  of  its  terms  and  basis, 
and  contracts  must  be  upheld  (Miles  versus 
McDermott,  31  Cal.  273;  Woods  versus  Car- 
penter, II  Otto  143;  Le  Roi  versus  MuUiken 
and  Moore  versus  Moore,  56  Cal.  90,  if  I 
have  the  citations  right).  Also  that  she  was 
not  so  much  prostrated  by  her  husband's 
death  that  she  was  unable  to  exercise  per- 
fectly all  her  mental  faculties,  that  she  had 
very  able  counsel,  and  by  them  she  was  fully 
informed  as  to  the  situation  and  her  rights. 

In  the  subsequently  filed  "Findings  of 
Fact  and  Conclusions  of  Law,"  Judge  Tem- 
ple considered  seventy-seven  points,  and  on 
seventy-two  of  them  found  for  the  defend- 
ants. 

The  case  was  appealed  December  15,  1886, 
and  in  January,  1890,  the  Supreme  Court 
handed  down  a  decision  sustaining  Judge 
Temple. 

For  Mrs.  Colton,  therefore,  the  net  result 
of  her  suit  was  a  heavy  bill  of  costs  that  she 
must  pay. 

Mr.  Huntington  had  won.  He  had  de- 
feated and  crushed  the  widow  of  his  old 
friend,  and  the  securities  that  were  the  prizes 
of  the  long  conflict  rested  in  the  coffers  of  the 
Four  of  Sacramento.  But  Mr.  Huntington 
had  his  own  costs  to  pay.  For  it  was  in  this 
case  that  the  Colton  letters,  printed  in  a 
previous  article,  were  produced,  and  the 
real  nature  of  his  Washington  operations 
proved  to  the  world.  From  this  time  on 
those  letters  were  hung  about  his  neck. 


Speaking  of  Widows  and  Orphans 


87: 


II 

THE   MAY  DAY  AT  BREWER'S  FARM 

THE  LONG  CONTEST  BETWEEN  THE  SETTLERS 
AND    THE    COMPANY 

For  many  years  now  this  colossal  institu- 
tion had  been  the  virtual  ruler  of  the  state, 
setting  up  this  officer  and  pulling  down  that, 
filling  places  in  the  government  with  obedient 
henchmen,  controlling  the  parties  and  select- 
ing their  candidates,  holding  the  avenues  to 
distinction  and  even  to  success,  choosing 
judges  and  commissioners,  nominating  jurors, 
and  with  equal  facil- 
ity influencing  legis- 
lators and  witnesses.* 
Men  or  even  com- 
munities that  con- 
spicuously opposed 
the  machine  were 
made  to  suffer.  As 
the  railroad  built  ex- 
tensions of  its  lines 
it  levied  tribute  upon 
towns  thus  brought 
within  its  reach  and 
sometimes  inflicted 
very  serious  injury 
upon  those  that  re- 
fused to  make  grants 
of  land  or  of  money. 

For  some  such  of- 
fense the  city  of  Stock- 
ton was  a  long  time 
on  the  company's 
black  list  and  hin- 
dered in  its  growth. 
Long  before,  Silvey- 
ville  had  been  practi- 
cally annihilated,  the 
new  town  of  Dixon 
being  built,  in  a  spirit 

of  revenge,  three  and  a  half  miles  away. 
Bakersfield  having  once  incurred  the  com- 
pany's displeasure,  the  town  of  Kern,  three 
miles  off,  was  developed  to  crush  Bakersfield. 

OAKLAND  FIGHTS  RAILROAD  FOR  ITS  STREETS 
AND  PIERS 

It  would  be  easy  to  multiply  the  instances 
that  to  all  except  Californians  must  seem  im- 
probable fiction.  The  city  of  Oakland,  now 
one  of  the  fairest  and  most  prosperous  in 
California,  was  once  obliged  to  fight  for  its 

*  Allegations  of  very  flagrant  witness-bribing  were  made  in 
San  Francisco,  April,  i8g6,  in  the  case  of  Louis  Schmidt,  who 
confessed  he  had  been  bribed  by  agents  of  the  railroad  to  testify 
falsely  in  the  damage  suit  of  Mary  Quill. 


MRS.   D.   D.   COLTON,  WHO.   AFTER   HER  HUS- 
BANDS    DEATH,    WAS    STRIPPED    OF    HER 
WEALTH    BY    HER    HUSBANDS    BUSI- 
NESS PARTNERS,  THE  "  BIG  FOUR." 


mere  existence  against  the  railroad  company 
as  against  a  public  enemy.  Some  ver}-  ex- 
traordinary scenes  were  witnessed  in  that 
contest.  A  visitor  -  would  have  thpught  a 
civil  war  was  raging.  The  company  fenced 
off  public  streets  by  night  and  the  citizens 
tore  down  the  fences  by  day;  the  com- 
pany drove  piles  across  the  water-front 
slips  and  the  citizens  fought  to  remove 
them;  the  company  tried  to  strangle  the 
town  by  strangling  its  ferry  service  and  the 
titizens  underwent  strange  privations  to 
maintain  a  semblance  of  their  rights. 

The  power  and  su- 
premacy of  this  com- 
pany were  not  limited 
to  state  nor  to  mu- 
nicipal affairs.  Mer- 
chants or  shippers 
that  supported  any 
plan  to  secure  relief 
through  competition 
found  their  shipments 
delayed  and  their  ri- 
vals helped  with  re- 
bates. Lawyers  that 
unduly  pressed  ob- 
noxious suits  found 
their  practice  vanish- 
ing. Some  men  were 
ruined  for  their  op- 
position; some  were 
made  rich  for  their 
assistance.  No  one 
need  wonder  that  to 
.oppose  the  railroad 
came  to  be  regarded 
as  fraught  with  great- 
er danger  than  the 
average  man  could 
afford  to  face. 

This  brings  me  to 
the  incident  that  best  illu.strates  the  truly 
autocratic  power  that  these  men  grasped  and 
the  wanton  spiri    in  which  they  used  it. 

One  of  the  triumphs  of  Mr.  Huntington's 
me  hod  of  "  ex]>laining  "  things  to  members  of 
Congress  (at  a  cost  of  millions  of  dollars 
added  to  the  company's  capitalization)  was 
a  bill  j^assed  in  1866  granting  to  the  railroad 
company  in  alternate  sections  12,800  acres 
of  public  land  for  every  mile  it  should  build 
from  San  Francisco  to  a  point  at  the  south- 
eastern corner  of  the  .state;  or  half  the  land 
in  a  strip  forty  miles  wide  along  its  right  of 
way.  The  line  was  laid  out  and  the  rail- 
road's   lands    designated.     Sub.sequently    it 


88 


Hampton's  Magazine 


somewhat  changed  its  route  and  therefore  the 
land  to  which  it  was  entitled  under  the  act. 

At  that  time,  and  for  years  afterwards,  only 
a  small  part  of  the  line  had  been  constructed 
and  there  grew  up  a  question  whether  the 
railroad  were  really  entitled  to  certain  parts 
of  the  land  it  claimed  in  Fresno,  Tulare,  and 
some  other  counties.  The  rulings  of  four 
Secretaries  of  the  Interior,  an  Attorney-Gen- 
eral,* and  a  Commissioner  of  the  Federal 
Land  Office,  supported  the  view  that  the 
railroad  company  had  no  right  to  this  prop- 
erty, but  the  company  continued  to  claim  the 
land  and  to  sell  it. 

THE    TERMS    OFFERED    IN    THE   RAILROAD'S 
CIRCULAR 

Meantime  many  settlers  had  come  into 
the  Fresno-Tulare  region. f  Some  had  se- 
cured their  titles  from  the  government  be- 
fore the  railroad's  route  was  changed.  These 
now  found  their  farms  to  embrace  sections 
claimed  by  the  company.  Many  others  com- 
ing after  the  final  determination  of  the  line, 
had  taken  railroad  lands  at  the  company's 
invitation  and  under  terms  set  forth  by  the 
company's  circulars.  These  speedily  had 
troubles  of  another  sort. 

The  company's  circulars,  signed  by  its 
officers,  setting  forth  the  attractions  of  the 
Fresno-Tulare  region  and  ofifering  unusual 
inducements  to  settlers,  had  been  widely 
scattered  over  the  Middle  West.  They  dealt 
in  an  apparent  spirit  of  frankness  and  truth, 
describing  the  lands  as  of  an  excellent  soil 
but  dry — a  fault  easily  remedied  by  irriga- 
tion, when  the  soil  would  be  found  to  be  of 
surpassing  fertility.  Terms  would  be  re- 
markably easy.  Here  are  paragraphs  from 
one  of  the  circulars : 

On  page  6 — The  company  invites  settlers  to  go 
upon  their  lands  before  patents  are  issued  or  the 
road  is  completed,  and  intends  in  such  cases  to  sell 
to  them  in  preference  to  any  other  applicant  and 
at  a  price  based  upon  the  value  of  the  land  with- 
out the  improvements  put  upon  them  by  the  set- 
tlers. 

On  page  7 — If  the  settlers  desire  to  buy,  the  com- 
pany gives  them  the  first  privilege  of  purchase  at 
a  fixed  price,  which  in  every  case  shall  only  be  the 
value  of  the  land  without  regard  to  improvements. 

On  page  g — The  lands  are  not  uniform  in  price 
but  are  offered  at  various  figures  from  $2.50  up- 


*  The  dates  of  these  decisions  were  as  follows: 
Secretary  Browning,  July  14,  1868. 
Secretary  Cox,  November  2,  and  November  n,  1869. 
Secretary  Delano,  May  9,  1873,  and  February  26,  1874. 
Secretary  Schurz,  August  2,  1878. 
Attorney-General  Devens,  July  r6,  1878. 
Commissioner  Drummond,  January  28,  1874. 

t  About  240  miles  southeast  of  San  Francisco. 


ward  per  acre;  usually  land  covered  with  tall  tim- 
ber is  held  at  $5  per  acre  and  that  with  pine  at  $10. 
Most  is  for  sale  at  $2.50  to  $5. 

In  ascertaining  the  value,  any  improvement  that 
a  settler  or  other  persons  may  have  on  the  lands  will 
not  be  taken  into  consideration;  neither  will  the 
price  be  increased  in  consequence  thereof.  Settlers 
are  thus  assured  that  in  addition  to  being  accorded 
the  first  privilege  of  purchase  they  will  be  protected 
in  their  improvements.* 

In  response  to  these  liberal  offers,  many 
farmers  came  from  Missouri  and  Illinois  and 
took  up  land.  They  found  the  country  a 
sandy  waste  and  worthless  until,  by  uniting 
their  efforts  and  capital,  they  had  constructed 
an  irrigation  system,  whereupon  the  soil  be- 
came exceedingly  fertile.f 

Meanwhile,  although  they  made  repeated 
applications,  they  were  unable  to  get  their 
titles  from  the  railroad  company.  The  rea- 
son why  they  could  not  get  their  titles  was 
because  the  company  had  not  taken  out  its 
patents,  and  the  reason  why  it  had  not  taken 
out  its  patents  was  because  so  long  as  it  had 
no  patents  on  its  lands  it  could  not  be  taxed 
for  them.  This  was  the  simple  little  plan  it 
uniformly  pursued  and  thereby  deprived  the 
counties  and  the  State  of  California  of  mil- 
lions of  dollars. J 

But  in  1877  the  company  began  to  take  out 
its  patents,  and  soon  afterwards  to  demand 
payment  of  the  settlers, 

THE  SETTLERS  OF  FRESNO-TULARE  PROTEST 

Then  the  settlers  learned  to  their  amaze- 
ment that  the  land  was  not  to  be  paid  for  at 
$2.50  an  acre  but  at  from  $25  to  $40  an  acre, 
and  that  all  the  improvements  they  had  made  ■ 
were  counted  in  the  price.     Even  the  irriga-  j 
tion  ditch  that  they  had  constructed  at  their  ^ 
own  expense  and  with  their  own  labor  be- 
came a  great  factor  in  the  increase.     The  land 
was  not  to  be  offered  to  them  first;  it  was  to  be 
thrown  on  the  market  for  any  purchaser. 

When  the  settlers  found  that  the  company 
really  intended  thus  to  violate  its  agreement 
they  protested,  showing  the  circulars  and  the 
promises  therein.     They  offered  to  pay  the 

*  These  circulars  were  subsequently  confirmed  by  letters  from 
agents  of  the  railroad  company  to  individual  settlers. 

tThey  constructed  two  inadequate  ditches  before  they  got 
one  that  carried  enough  water.  It  was  some  miles  longand  was 
dug  chiefly  by  the  voluntary  labor  of  the  settlers,  most  of  whom 
were  extremely  poor  and  lived  in  destitution  until  the  water  be- 
gan to  flow  around  their  lands.  Many  of  the  settlers,  while  they 
worked  on  the  ditch,  lived  upon  corn  meal  groupd  in  hand 
coffee  mills  and  upon  fish  that  they  caught.  None  of  them 
understood  irrigation  and  they  were  obliged  to  learn  by  experi- 
ence. There  is  extant  a  very  pathetic  letter  from  a  woman 
of  education  and  refinement,  Mrs.  Mary  E.  Chambers,  a  sister 
of  one  of  these  men,  giving  a  vivid  account  of  the  hardships  the 
settlers  endured  in  these  years. 

t  For  explicit  testimony  on  this  point,  see  Pacific  Railroad 
Commission  Report,  p.  146. 


speaking  of  Widows  and  Orphans 


89 


zompany  at  the  stipulated  prices,  but  all  pro- 
tests, oflfers,  and  arguments  were  alike 
.vithout  avail;  and  the  company  preparing 
to  press  its  claims,  many  of  the  threatened 
farmers  formed  a  Settlers'  League  to  defend 
by  united  action  what  they  believed  to  be 
their  rights.  Four  times  they  had  petitioned 
Congress  (without  result,  of  course),  and  now 
thev  resorted  to  the  law.  A  test  case  was 
tried  in  the  Federal  Court  and  on  December 
15,  1879,  Judge  Lorenzo  Sawyer  (who  after- 
ivards  held  Leland  Stanford  to  be  immune 
from  disagreeable  questions)  rendered  a  de- 
zision  upholding  the  railroad  company  in  all 
its  contentions.  From  this  decision  the  per- 
plexed settlers  prepared  to  appeal  to  the 
L'nited  States  Supreme  Court. 

Meantime,  the  railroad  company  had  be- 
^un  to  sell  the  settlers'  lands  and  four  or  five 
men  moved  into  the  region  and  built  houses 
under  the  railroad  company's  warrant.  In 
June,  1879,  a  band  of  men  came  by  night  to 
the  place  of  Perry  C.  Phillips,  a  purchaser 
from  the  railroad,  removed  the  inmates  and 
all  the  contents  to  a  place  of  safety,  and  burned 
the  house  to  the  ground.*  After  this  the 
company  found  great  difficulty  in  selling  any 
af  the  lands. 

WRITS    OF    EJECTMENT    ISSUED 

What  went  on  in  the  minds  of  the  railroad 
managers  is  only  to  be  surmised,  but  from 
subsequent  events  the  conclusion  seems  rea- 
sonable that  after  so 
many  years  of  auto- 
cratic rule  they  were 
greatly  nettled  by  this 
active  and  so  far  suc- 
cessful opposition.  The 
settlers  believed  that, 
following  the  usual  cus- 
tom, both  sides  should 
now  halt  to  await  the 
Supreme  Court's  deci- 
sion. As  to  this  the 
railroad  company  had 
another  opinion.  Ignor- 
ing the  pending  litiga- 
tion, it  sharked  up  from 
the  north  two  hardy 
men  to  whom  it  prom- 
ised land  without  charge 
if  they  would  succeed 
in  breaking  the  settlers' 


position.  One  of  these  men,  Walter  J.  Crow, 
was  reputed  to  be  among  the  best  rifle  and 
revolver  shots  in  the  state,  and  the  settlers 
thought  they  knew  the  purpose  for  which  he 
was  employed.  The  antecedents  of  the  other, 
M.  D.  Hartt,  are  not  so  well  known. 

Hartt  and  Crow  went  into  the  region,  and 
soon  after,  with  the  other  men  that  had  pur- 
chased land  from  the  railroad,  they  exhibited 
this  notice,  which  they  said  they  had  received: 

Tulare  County,  April  24,  1880. 
You  are  hereby  ordered  to  leave  the  county. 

By  Order  of  the  League. 

The  Settlers'  League  did  not  send  out  the.se 
notices  and  had  no  knowledge  of  them.  At 
the  same  time  reports  were  sent  abroad  that 
bands  of  armed  and  masked  men  were  riding 
up  and  down  the  district  making  threats  and 
committing  outrages,  although  the  residents 
were  not  aware  of  such  matters. 

Next,  the  railroad  company  went  into  the 
Federal  Court,  secured  writs  of  ejectment, 
placed  them  in  the  hands  of  A.  W.  Poole, 
United  States  Marshal  of  the  district,  and 
demanded  that  he  serve  them  at  once,  re- 
move the  settlers,  and  put  Hartt  and  Crow 
in  possession. 

The  marshal,  of  course,  was  obliged  to  com- 
ply, and  on  Monday,  May  10,  1880,  he  went 
to  Hanford,  Tulare  County,*  the  trading  town 
that  had  grown  up  near  the  settlers'  lands. 
Major  T.   J.    McQuiddy,   president  and 
leader   of    the    Settlers' 
League,  upon  which  he 
had  always  urged  mod- 
eration   and     patience, 
learned    that    night    of 
the     marshal's     arrival 
and     understood     well 
enough  his  errand.  With 
the     secretar>'     of     the 
league  Major  McQuiddy 
drew   up   the   following 
address : 


To 


States 


*  It  is  denied  that  the  Settlers' 
League  had  any  connection  with 
this  afiair. 


THE  United 
Marshal — 
Sir:  We  understand  that 
you  hold  writs  of  ejectment 
issued  against  settlers  of 
Tulare  and  Fresno  counties, 
for  the  purpose  of  putting 
the  S.  P.  R.R.  Co.  in  pos- 
session of  our  lands,  upon 
which  we  entered  in  good 
faith  and  have  by  our 
own  patient  industry  trans- 


JUDGE  JACKSON  TEMPLE.  WHO  DECIDED 
MRS.  COLTOX'S  SUIT  AGAIN'ST  HER. 


*  It  is  now  in  Rings  County. 


90 


Hampton's  Magazine 


formed  from  a  desert  into  valuable  and  productive 
homes. 

We  are  aware  that  the  United  States  District 
Court  has  decided  that  our  lands  belong  to  said 
Railroad  under  patent  issued  by  the  United  States 
Government. 

We  hereby  notify  you  that  we  have  had  no  chance 
to  present  our  equity  in  the  case  nor  shall  we  be  able 
to  do  so  as  quickly  as  our  opponents  can  complete 
their  process  for  a  so-called  legal  ejectment,  and  we 
have  therefore  determined  that  we  will  not  leave 
our  homes  unless  forced  to  do  so  by  a  superior  force. 
In  other  words,  it  will  require  an  army  of  i,ooo  good 
soldiers  against  the  local  force  that  we  can  rally  for 
self-defense,  and  we  further  expect  the  moral  sup- 
port of  the  good,  law-abiding  citizens  of  the  United 
States  sufficient  to  resist  all  force  that  can  be  brought 
to  bear  to  perpetuate  such  an  outrage. 

Three  cases  have  been  appealed  to  the  United 
States  Supreme  Court  and  we  are  determined  to  sub- 
mit to  no  ejectment  until  said  cases  are  decided. 

We  present  the  following  facts: 

First — These  lands  were  never  granted  to  the 
Southern  Pacific  Railroad  Company. 

Second — We  have  certain  equities  that  must  be 
respected  and  shall  be  respected. 

Third — The  patents  they  hold  to  our  lands  were 
acquired  by  misrepresentation  and  fraud,  and  we, 
as  American  citizens,  cannot  and  will  not  respect 
them  without  investigation  by  our  government. 

Fourth — The  Southern  Pacific  Railroad  Company 
have  not  complied  with  their  contract  both  with  our 
people  and  with  our  government,  and  therefore  for 
these  several  reasons  we  are  in  duty  bound  to  ask 
you  to  desist.    ^^  Authority  of  the  League. 

Early  the  next  morning  before  this  could 
be  delivered  to  him,  the  marshal  hired  a 
buggy  and  accompanied  by  W.  H.  Clark,  the 
railroaders'  grader  or  appraiser  of  lands, 
he  drove  three  miles  northeast  to  the  near- 
est of  the  farms  covered  by  the  writs  of 
ejectment — the  farm  of  W.  B.  Braden,  a 
member  of  the  League. 

In  another  buggy  close  behind  came 
Hartt  and  Crow,  heavily  armed  with  re- 
volvers, rifles,  and  shotguns,  the  shotguns 
being  loaded  with  small  bullets  or  slugs  in- 
stead of  shot. 

It  happened  that  on  this  day  the  League 
was  having  a  picnic  some  miles  away; 
whether  this  fact  influenced  the  action  of  the 
railroad  company  and  its  traveling  batteries 
I  do  not  know.  Braden  was  at  the  picnic: 
no  one  was  in  the  little  cottage.  The  mar- 
shal entered,  carried  out  all  the  household 
goods,  piled  them  in  the  road,  and  formally 
declared  Hartt  to  be  in  possession  of  the 
premises.* 

This  was  about  nine  o'clock  in  the  morning. 
The  marshal  and  Clark,  closely  followed  by 


*  Four  loaded  cartridges  were  left  on  Braden's  doorstep,  prob- 
ably as  an  indication  of  what  would  be  the  result  of  any  re- 
iistance  on  his  part. 


Hartt  and  Crow,  drove  to  the  next  place,  the 
farm  of  one  Brewer,  over  the  border  of  Fresno 
County,  and  about  three  and  a  half  miles 
from  Braden's.  They  encountered  on  the 
road  a  settler  named  J.  H.  Storer,  an  old 
friend  of  Marshal  Poole's,  and  Poole  reined 
in  for  a  time  while  the  two  talked.  Storer 
said  the  settlers  hoped  for  a  compromise  with 
the  railroad  company  and  he  would  try  to 
arrange  one. 

When  they  drove  on,  Clark,  the  grader, 
reproved  the  marshal  for  talking  with 
Storer  because  Storer  was  the  partner  of 
Brewer,  whom  they  had  come  to  dis- 
possess. 

About  ten  o'clock  they  arrived  at  Brewer's 
place.  He  was  harrowing  in  his  field.  Both 
buggies  drove  into  the  yard,  past  the  house, 
and  about  two  hundred  yards  west  into  the 
field.  At  this  moment  there  appeared  about 
fifteen  of  the  settlers  in  a  group,  some  mount- 
ed, some  on  foot,  advancing  toward  them. 
The  settlers  carried  no  visible  arms;  among 
them  all  were  only  five  small  pocket  pistols. 
Marshal  Poole  descended  from  his  buggy  and 
went  forward,  saluting  them  courteously. 
The  foremost  of  the  settlers  addressed  him 
quietly,  asking  the  marshal  not  to  serve  any 
writs  until  the  case  then  pending  in  the 
Supreme  Court  should  be  decided.  He  also 
handed  to  the  marshal  the  address  that 
Major  McQuiddy  had  drawn  up. 

Marshal  Poole  read  the  document  and 
said  his  duty  was  to  serve  the  writs  then  and 
there.  The  settlers  replied  without  vehe- 
mence that  they  would  not  allow  him  to  serve 
them. 

They  now  closed  about  the  marshal  and 
demanded  that  he  give  up  his  revolver  and 
surrender  to  them,  whereupon  he  would  be 
conducted  in  safety  to  a  station  whence  he 
could  leave  the  county.  He  said  he  would 
yield  to  force  and  go  away  but  he  would  not 
give  up  his  revolver,  although  he  promised  not 
to  use  it.  Two  of  the  settlers,  Archibald 
McGregor  and  John  E.  Henderson,  were  then 
told  off  to  guard  the  marshal  and  Clark  to 
the  railroad  station  at  Kingsburg. 

THE    CRACK    RIFLE    AND    REVOLVER    SHOT 
KILLS    FIVE 

All  this  Hartt  and  Crow  watched  narrowly 
from  the  other  buggy  about  seventy-five  feet 
away.  As  the  conference  with  the  marshal 
ended,  Hartt  reached  down  and  seized  a 
rifle. 

"Let's  shoot,"  said  he. 


B Without  shifting  his  watchful  gaze  from 
group  of  settlers,  Crow  put  a  hand  upon 
bis  companion's  arm. 

"Not  yet,"  said  he,  "it  isn't  time." 

James  Harris,  from  the  group  about  the 
narshal,  rode  up  to  Hartt  and  Crow  and  cried: 

"Give  up  your  arms!" 

He  was  within  a  few  feet  of  the  buggy. 
Crow  laid  his  hands  upon  a  shotgun  before 
him.  He  raised  it  deliberately;  he  fired  it 
into  Harris'  face. 

,  Henderson  spun  around  at  the  sound  and 
ivhipped  from  his  pocket  a  small  caliber  re- 
,^olver.  He  caught  a  glimpse  of  Harris  falling 
trom  his  horse.  Then  he  rode  forward  with 
lis  revolver,  trying  to  fire  it  at  Crow.  The 
lammer  clicked  on  the  cartridge  but  the  arm 
jva,s  not  discharged.  Hartt  started  to  descend 
irom  the  buggy.  As  he  leaned  over  the 
«rheel  Henderson's  revolver  worked  at  last 
md  the  bullet  struck  Hartt  in  the  abdomen.* 
\t  the  same  instant  Crow,  from  his  raised 
jun,  shot  Henderson  dead. 

Crow  leaped  to  the  ground  with  a  revolver 
n  one  hand  and  carrying  other  weapons. 
He  was  firing  rapidly  into  the  group  of  set- 
:lers.  Iver  Kneutson  was  shot  dead  before 
le  could  draw  his  revolver.  Daniel  Kelly 
"ell  from  his  horse  with  three  bullets  through 
lis  body.  Archibald  McGregor,  who  was 
irmed  with  only  a  penknife,  was  shot  twice 
through  the  breast.  As  he  ran  screaming 
toward  a  pool  of  water.  Crow  at  one  hundred 
ind  seventy  paces  shot  him  in  the  back.  He 
fell  over  and  lay  still.  Crow  fired  his  shot- 
^n  and  Edward  Haymaker,  also  unarmed, 
fell,  struck  in  the  head. 

All  this  happened,  as  it  seemed,  in  an  in- 
stant. A  stupefaction  had  fallen  upon  the 
spectators;  they  could  but  stand  and  stare. 
J.  M.  Patterson  awoke  first.  He  bounded  for- 
ward cr}'ing,  "This  has  gone  far  enough !  It 
must  stop ! "  One  or  two  ineffectual  shots  were 
fired.  As  they  rang  out,  Major  McQuiddy, 
who  all  the  morning  had  been  trying  to  over- 
take the  marshal,  hurried  upon  the  scene 
and  took  charge  of  the  disorganized  settlers. 

Crow  still  stood  there,  weapons  in  hand, 
menacing  the  crowd.  McQuiddy  spoke 
rapidly  to  the  marshal,  protesting  against 
any  further  action.  As  the  two  advanced. 
Crow  suddenlv  doubled  forward  and  dodged 


Speaking  of  Widows  and  Orphans 


91 


*  Hartt  stated  before  his  death  that  he  had  been  sitting  in  the 
buggy  with  his  feet  on  the  dashboard  and  was  in  that  position 
when  he  was  shot.  The  autopsy  disproved  this  assertion  for 
the  bullet  entered  at  the  upper  boundary  of  the  abdomen  and 
traversed  the  whole  abdominal  cavity  downward,  showing  that 
he  had  been  shot  from  a  pistol  held  above  and  almost  paraUei 
with  his  body. 


past  the  comer  of  the  bam  toward  a  field  of 
standing  wheat. 

"Don't  let  that  man  escape!"  shouted 
McQuiddy,  and  as  Crow  disappeared  into 
the  tall  grain  someone — just  who  is  not  likely 
ever  to  be  known — followed  upon  his  trail. 

McQuiddy  now  turned  to  the  wounded  and 
ordered  all  to  be  carried  to  Brewer's  house 
while  messengers  rode  for  surgeons.  The 
bodies  of  Harris,  Henderson,  and  Kneutson 
were  placed  upon  the  porch;  they  were  dead. 
Within  the  house  Kelly,  McGregor,  and 
Hartt  were  moaning  and  twitching  with 
agony.  Two  doctors  were  brought  from  the 
village  and  found  that  all  .were  mortally 
hurt  except  Haymaker.* 

This  made  six  persons  done  to  death  that 
morning — on  the  Southern  Pacific's  corruptly 
obtained  and  wrongly  held  grant  from  the 
public  domain. 

Very  soon  there  was  another.  Crow, 
dodging  through  the  wheat,  was  making  for 
the  house  of  one  Haas,  his  brother-in-law,  and 
likewise  an  opponent  of  the  settlers.  As  he 
ran  he  came  to  the  irrigation  ditch  and  turned 
off  along  its  course;  a  ditch  tender  working 
below  saw  him  nmning.  At  a  mile  and  a  half 
from  Brewer's  there  was  a  bridge  where  the 
road  crossed  the  ditch.  Major  McQuiddy 
had  sent  men  on  horseback  to  try  to  catch 
Crow,  These  were  watching  for  him  at  the 
bridge.  Haas  and  his  hired  man  drove  up 
from  the  other  direction  in  a  wagon  contain- 
ing six  guns  and  a  supply  of  ammunition. 

"Where's  Crow?"  asked  Haas,  seeing  the 
group  by  the  bridge. 

At  that  instant  a  cry  arose,  for  Crow  broke 
into  sight  along  the  ditch.  He  stopped, 
dodged  back,  and  whipped  up  his  rifle,  aim- 
ing it  at  George  Hackett.  Before  he  could 
fire,  a  shot  rang  behind  him.  He  swayed, 
tumed  a  little  and  pitched  over  upon  his  face 
— dead.     He  had  been  shot  through  the  chest. 

FALSE  REPORTS  OF  INSURRECTION 
The  instant  that  the  news  of  that  morn- 
ing's work  reached  Hanford,  the  railroad 
company  announced  that  its  telegraph  office 
there  had  been  closed  and  the  operator  driven 
away  by  the  League,  and  that  owing  to  the 
armed  insurrection  ■  in  progress  all  trains, 
passenger  and  freight,  had  been  annulled. 
At  Goshen,  the  other  near-by  station,  no  tele- 
grams were  received  except  for  the  railroad 
company. 

♦  McGregor  and  Kelly  died  before  morning  and  Hartt  on  the 
i2th. 


92 


Hampton's  Magazine 


By  these  means  the  company  secured 
control  of  the  news  and  the  first  reports 
described  a  bloody  and  unprovoked  attack 
by  desperadoes  on  the  authority  of  the  United 
States.  In  San  Francisco  five  eminent  rail- 
road officers,  including  Charles  Crocker  and 
W.  W.  Stow,  at  that  time  the  political 
manager  for  California,  hastened  to  news- 
paper offices  and  explained  the  innocence  of 
the  company  and  the  depravity  of  the  ruffians 
that  had  defied  the  Federal  authority. 

Later  the  effect  of  these  communications 
was  somewhat  marred  by  the  appearance  in 
San  Francisco  of  Walter  Leach,  the  Hanford 
telegraph  operator,  and  his  statement  that 
he  had  been  removed  and  his  office  closed, 
not  by  the  League,  but  by  the  railroad  com- 
pany. 

The  sheriff  also  sent  word  that  there  was 
no  disturbance  and  no  reason  why  trains 
should  not  run.  Furthermore,  independent 
reporters,  notably  one  for  the  Visalia  Delta, 
got  to  the  scene  and  sent  out  unvarnished 
reports.  Yet  it  is  not  to  be  denied  that  a 
certain  impression  was  created  by  the  rail- 
road company's  tainted  news,  that  this  im- 
pression still  persists,  and  that  to  this  day 
the  affair  is  far  from  clear  in  many  minds 
to  which  it  should  be  no  mystery. 

The  funeral  of  the  slaughtered  settlers  on 
the  1 2th  was  very  impressive.  All  business 
and  work  were  suspended  in  the  region  and 
in  a  procession  of  vehicles  more  than  two 
miles  long,  a  thousand  farmers  followed  the 
hearses  to  the  cemetery.  McGregor  and 
Kelly  were  single,  but  Harris  and  Henderson 
had  each  a  wife  and  a  child,  and  Kneutson 
left  a  wife  and  nine  children.  All  of  these 
were  presently  evicted  from  their  homes. 

There  was  no  further  disturbance.  The 
farmers  were  disheartened  by  the  deaths  of 
their  comrades  and  by  the  obviously  resist- 
less power  of  the  railroad,  against  which  no 
rights,  no  law,  no  protest,  and  no  appeal  could 
prevail.  On  May  26th,  five  of  them  went  to 
San  Francisco  to  make  what  terms  they  could 
with  this  supreme  power.  As  soon  as  they 
alighted  in  the  city,  they  were  arrested  and 
thrown  into  jail  charged  with  conspiracy  and 
resisting  a  Federal  officer.  Not  one  of  them 
had  been  anywhere  near  the  massacre. 

Subsequently  they  were  released,  but  other 
arrests  were  made,  many  indictments  found, 
and  John  J.  Doyle,  W.  H.  Patterson,  Purcell 
Prior,  William  B.  Braden,  and  Courtney 
Talbot  were  tried  before  Judge  Lorenzo 
Sawyer,  who  practically  ordered  the  jury  to 


convict.  The  jury  refused  to  convict  of  con] 
spiracy  but  found  the  prisoners  guilty  of  re-j 
sisting  the  marshal.  They  were  sentenced 
to  five  months'  imprisonment  each  and  were 
sent  to  jail. 

THE    RAILROAD    COMPANY    GETS   THE 
DISPUTED    LAND 

As  for  the  land,  the  railroad  company  woi 
that  handsomely,  for  after  the  terrible  wort 
of  that  May  day  the  appeals  of  the  three  test 
cases  were  allowed  to  go  by  default  and 
Judge  Sawyer's  decision  stood,  dispossessing 
the  settlers.  Years  afterwards  practically  the 
same  issue  was  raised  again  in  another 
county  of  the  state,  and,  being  carried  to  the 
Supreme  Court,  the  court  ruled  against  the 
railroad  and  upheld  the  principle  for  which 
the  settlers  had  contended,*  so  that  their 
position  would  seem  to  have  been  as  legally 
sound  as  it  was  morally  just. 

But  the  land  for  which  they  had  con- 
tended was  none  the  less  lost  to  them  and 
became  a  part  of  that  total  on  which  you 
and  I  have  the  pleasure  of  paying  interest 
charges,  for  it  was  all  swept  into  the  capi- 
talization. Other  additions  thereto  occa- 
sioned by  this  episode  were  not  great:  some- 
thing for  legal  expenses,  something  for 
newspaper  articles,  something  for  political 
dirty-work  men,  and  a  few  other  similar  items. 
That  was  all,  because  the  funerals  of  the 
farmers  killed  were  paid  for  by  friends  and 
neighbors  and  cost  the  company  literally 
nothing.  No  doubt  these  necessary  expenses 
would  have  been  borne  by  the  orphaned  and 
dispossessed  families  of  the  deceased  if  the 
railroad  company  had  left  them  anything  to 
pay  with. 

This  is  the  battle  of  Mussel  Slough,  to 
which  you  may  have  heard  some  reference. 
It  is  all  over  now;  the  Southern  Pacific  is 
triumphant.  But  for  years  the  settlers  of 
Tulare  County  held  memorial  services  on 
each  anniversary  of  that  bloody  day  at  Brew- 
er's Farm.  They  remembered,  though  the 
rest  of  the  world  and  the  railroad  company 
speedily  forgot,  f 


*  Southern  Pacific  Company  versus  Groeck,  74  Fed.  385,  183 
U.  S.  690.  In  the  case  of  Boyd  versus  Brinckin,  decided  by  the 
Cahfornia  Supreme  Court  a  few  months  after  the  massacre  the 
same  principle  was  involved  and  was  upheld  by  the  unanimous 
decision  of  the  court,  Chief  Justice  Sharpstein  writing  the  opinion. 

t  The  authorities  for  this  article  are  the  statements  of  sur- 
vivors of  the  massacre;  the  statements  of  eyewitnesses  pub- 
lished at  the  time;  the  accounts  printed  by  the  San  Francisco 
Chronicle,  Alta  California,  Bulletin,  Call,  and  Examiner,  and 
particularly  the  detailed  reports  in  the  Visalia  Delta;  the  rare 
pamphlet  entitled  "  The  Struggle  of  the  Mussel  Slough  Settlers  "  ; 
testimony  given  at  the  trials;  and  the  account  printed  in  the  Atlas 
of  Kings  County. 


I 


I 


The  Remedy  of  the  Law 

By  Charles  Edward  Russell 

AntJior  of  '^Speaking  of  Widmi's  ami  Orphans,''''  "  77ie  .Millionaire  Mill^''  etc. 
Portraits    by    S,    G.    Cahan 


Editorial  Note. — A  few  weeks  ago  the  country  got  excited  over  the  announcement 
that  the  railroads  were  going  to  raise  their  transportation  rates.  President  Taft,  by  getting  out 
an  injunction,  stopped  this  move  for  a  short  time.  Congress,  the  country  was  assured,  was  going 
to  fix  things  all  right  by  passing  a  bill. 

What  good  will  proposed  legal  action  do? 

For  answer,  we  recommend  you  to  read  Mr.  Russell's  series  of  railroad  articles.  Especially 
read  the  following  analysis  of  the  Southern  Pacific  Railroad  and  its  relations  with  the  people  of 
California  and  other  states.  Between  the  lines,  too,  you  will  learn  much  about  what  is  causing 
the  ever-increasing  cost  of  living,  and  why  concentration  of  wealth  in  the  pockets  of  a  few  men 
is  constantly  increasing. 


As  to  the  specific  cause  of  the  increased  cost  of 
living,  President  Taft  to-day  frankly  told  various 
of  his  callers  that  he  was  unable  to  account  for  it. — 
N ews  dispatch  from  Washington,  December  30, 1909. 

IN  the  grip  of  the  great  powfsr  of  the  Southern 
Pacific  Railroad,  the  people  of  California 
learned  that  they  had  small  advantage  from 
those  wonderful  gifts  of  nature  wherewith  their 
state  ran  over.  One  resource  after  another 
was  discovered  and  developed,  gave  forth  its 
promise  of  prosperity,  and  was  incorporated 
into  the  money-making  machine  of  the  railroad 
.  monopoly,  or  asphyxiated  by  its  high  rates. 

The  richness  of  the  land  was  for  the  rail- 
road company  and  not  for  the  producers. 

Orange  growers  found  that  while  they  could 
raise  the  best  and  cheapest  of  all  oranges  and 
in  unequaled  abundance,  the  freight  charges 
absorbed  the  profits  of  their  toil. 

California  wines  attained  a  just  celebrity; 
but  if  they  were  to  be  shipped  by  rail,  the 
freight  rates  barred  them  from  general  use 
and  defeated  the  wine  growers. 

Wonderful  crops  of  deciduous  fruits, 
peaches,  plums,  apples,  cherries,  and  pears, 
sometimes  rotted  on  the  trees;  no  man  could 
afford  to  ship  them  to  market. 

This  rich  adobe  soil,  surpassingly  fertile, 
was  found  to  produce  such  wheat  as  never 
before  had  been  seen;  stalks  six  feet  high, 
with  large,  firm  berries,  a  prodigious  }-ield; 
but  when  vast  areas  had  been  sown  in  wheat, 
the  farmers  discovered  that  at  the  freight 
rates  exacted  by  the  railroad  monopoly  no 


profit  lay  in  wheat  growing.  All  the  world 
was  eager  for  California  wheat;  vessels  came 
from  Liverpool  around  Cape  Horn  to  get  it, 
and  for  the  carriage  of  a  few  miles  from  the 
farms  to  the  seaport  the  railroad  charged  so 
much  that  nothing  remained  to  the  farmer. 

Here  lay  the  world's  vineyard,  orchard, 
and  granary;  what  Swinburne  calls  God's 
three  chief  gifts  to  man,  his  "bread  and  oil 
and  wine,"  showered  upon  it  in  overmeasure, 
and  the  railroad  monopoly  took  the  tilth  of 
all  for  its  own  coffers.  This  great  state,  seven 
hundred  and  seventy  miles  long  and  about 
two  hundred  and  fifty  miles  wide,  timbered, 
watered — with  so  much  gold  that  €ven  now 
over  eighteen  million  dollars'  worth  is  taken 
yearly  from  its  soil;  with  silver,  platinum, 
petroleum,  and  other  mineral  wealth;  with 
fertile  soil,  with  the  advantage  of  a  singu- 
larly delectable  climate;  with  so  much  variety 
of  products — seems  to  have  been  endowed 
with  every  good  thing  that  nature  knows, 
and  beyond  any  other  region  of  earth.  One 
might  think  that  all  the  natural  forces  had 
intelligently  combined  to  see  how  much  they 
could  do  here  for  man  and  his  life;  and,  to 
crown  their  work,  had  attracted  a  population 
of  the  best  fiber  the  American  race  had  pro- 
duced. 

CALIFORNIA'S    POPULATION    IS    CHOKED    OFF 

And  yet  the  population  of  this  splendid 
state  in  1906,  thirty-one  years  after  the  com- 
pleting of  the  trans-continental  railroad,  was 


217 


/ 


218 


Hampton's  Magazine 


only  1,485,053.     This  is  the  showing  of  its 
growth  by  the  United  States  census: 

1850 92,597 

i860 379,994 

1870 560,247 

1880 864,694 

1890 1,208,130 

1900 1,485,053 

From  1890  to  1900  only  277,000  increase. 
Is  not  that  significant? 

Comparative  Areas  and  Populations 


California 

France 

Germany 

Japan 

Italy 

Belgium 

Massachusetts 
New  Jersey .  .  . 
Illinois 


Area  in  Square 
Miles 


158,360 
207,054 
208,830 

147,655 
110,550 

11,373 
8,31s 
7,815 

56,650 


Population 


1,485,053 
38,961,945 
63,886,000 
49,732,952 

32,475,253 
7,074,910 
2,805,346 
1,883,669 
4,821,550 


The  true  garden  spot  of  the  world  and 
after  forty  years  of  railroad  domination  it  has 
about  two  million  inhabitants  in  an  area 
greater  than  Ohio,  Illinois,  Indiana,  Massa- 
chusetts, and  New  Jersey  together;  at  least 
forty  per  cent  larger  than  Italy  with  less 
than  one  twentieth  of  Italy's  population !  So 
that  to  this  day,  after  the  traveler  has  appre- 
hended something  of  the  unmatched  re- 
sources of  the  country,  the  greatest  of  all  its 
wonders  is  the  sparseness  of  its  population. 

The  same  lawless  power  that  perverted 
the  government  and  seized  the  courts  has 
throttled  California's  development  and  de- 
prived its  people  of  the  products  of  their 
industry.  Men  have  sown,  and  this  power, 
cunningly  adjusting  its  rates  for  that  purpose, 
has  year  after  year  taken  the  harvest. 

RAILROAD   CONTROL  OF   BOTH   PARTIES 

You  say:  For  this  abnormal  condition 
there  must  have  been  a  remedy.  This  nation 
of  ours  is  ruled  by  law  and  majorities.  It 
must  have  been  possible  to  subdue  or  to 
regulate  this  railroad.  The  fault  must  have 
been  with  the  people. 

No — no  fault  with  the  people.  The  peo- 
ple were  all  right.  The  fault  lay  in  the  sys- 
tem. The  choice  oflFered  to  the  people  was 
between  nominal  rule  by  the  Republican 
party  and  nominal  rule  by  the  Democratic 
party.  When  they  wearied  of  railroad 
tyranny  under  the  name  of  a  Republican 


administration,  they  revolted  and  introduced 
railroad  tyranny  under  the  name  of  a  Demo- 
cratic administration.  ,  The  monopoly  con- 
trolled the  Democratic  administration  as 
easily  as  it  had  controlled  the  Republican. 
It  was  a  power  too  great  to  be  withstood  and 
made  great  by  the  money  of  the  community 
that  it  now  oppressed. 

But  how  about  the  law?  How  about  the 
blessed  thing  called  regulation?  How  about 
the  government  supervision  of  corporations? 

That  is  the  very  thing  I  want  most  to  tell 
you  about.  Come,  now,  you  that  think  you 
can  deal  with  this  problem  by  regulation. 
Come  and  have  a  good  look  at  this  exhibit. 
It  will  not  give  you  cheer  but  it  ought  to 
furnish  unlimited  instruction. 

Law?  There  was  nothing  but  law;  and 
constitutions;  and  provisions;  and  orders; 
and  amendments;- and  fresh  statutes;  and 
then  more  law;  all  aimed  and  shaped  to  regu- 
late, restrict,  and  control  this  monster,  and 
the  monster  never  gave  a  hoot  for  all  of  them. 
Every  step  of  its  progress  had  been  marked 
by  the  violation  01  some  law  or  some  article 
of  the  holy  constitution,  and  it  strode  calmly 
and  cheerfully  over  all,  never  minding  in  the 
least. 

*  For  instance:  There  was  an  article  in  the 
Constitution  of  the  State  of  California  that 
expressly  forbade  a  certain  kind  of  lease  be- 
tween railroad  companies.  So  the  monopoly 
made  something  like  a  dozen  leases  of  that 
variety.  There  was  a  section  of  the  penal 
code  that  forbade  an  interchange  of  stock 
between  railroad  companies.  So  the  monop- 
oly proceeded  to  interchange  the  stock  of  its 
subsidiary  railroad  companies.  There  was 
an  article  in  the  state  constitution  pro- 
viding that  the  state  railroad  commissioners 
should  have  the  power  to  fix  passenger  and 
freight  rates.  And  when  on  one  famous 
occasion  these  commissioners  undertook  to 
exercise  this  power,  the  monopoly  brushed 
the  commissioners  out  of  its  way  and  con- 
tinued to  make  its  own  rates  in  its  old  fashion 
on  its  old  basis.  And  what  was  that  basis? 
All  the  traffic  would  bear. 

Some  of  these  incidents  should  be  told  in 
detail. 

I.  Thus  Section  20  of  Article  XII  of  the 
Constitution  of  California  contains  this  pro- 
vision: 

And  whenever  a  railroad  corporation  shall  for  the 
purpose  of  competing  with  any  other  common  car- 
rier lower  its  rates  for  transportation  of  passengers 
or  freight  from  one  point  to  another,  such  railroad 


The  Remedy  of  the  Law 


219 


ite  shall  not  be  again  raised  or  increased  from  such 
"standard  without  the  consent  of  the  governmental 
authority  in  which  shall  be  vested  the  power  to  regu- 
late fares  and  freights. 

CALIFORNIA   MERCHANTS   START   A   RAILROAD 

For  many  years  the  oppressed  and  de- 
frauded merchants  of  San  Francisco  held  to 
the  behef  that  the  one  sure  remedy  for  their 
troubles  was  in  competition.  If  they  could 
only  get  another  railroad,  competition  would 
compel  the  Southern  -  Central  -  Pacific  oli- 
garchy to  reduce 
rates  and  practice 
decency.  Many 
times  their  hopes 
of  competition  had 
been  raised  from 
many  sources,  but 
always  to  be  disap- 
pointed. The  new 
line  was  seized,  con- 
trolled, or  absorbed 
by  the  oligarchy,  or 
headed  off  if  it  was 
approaching  from 
the  East.  At  last  the 
merchants  formed 
their  own  company 
and  built  their  own 
line  from  San  Fran- 
cisco Bay  down  the 
rich  San  Joaquin 
Valley,  200  miles 
and  more. 

At  once  the  new 
line  made  rates 
much  lower  than 
the  Southern  Pa- 
cific's tariff,  and 
the  Southern  Pa- 
cific was  obliged 
to  meet  the  reduc- 
tions. Beautiful 
proof  of  the  virtue 

of  competition  as  a  cure-all !  But  the  Atchison, 
Topeka  &  Santa  Fe — which  had  acquired 
the  old  Atlantic  &  Pacific  (a  land  grant  rail- 
road across  Colorado  and  New  Mexico), 
extended  its  line  westward  and  secured  an 
entrance  to  California — offered  the  grandest 
promise  of  perfect  competition.  If  the  Santa 
Fe  could  be  brought  to  San  Francisco  there 
would  be  a  competing  outlet  to  the  Atlantic. 
So  the  merchants  sold  their  San  Joaquin 
Valley  line  to  the  Santa  Fe,  and  amidst 
great  rejoicing  the  Santa  Fe  entered  San 
Francisco  early  in  1900. 


BARCLAY  HENLEY,  WHOSE  EFFORTS  TO  FORCE 
CONGRESS  TO  RECLAIM  THE  SOUTHERN  PA- 
CIFIC'S   FORFEITED    LAND    GRANT  WERE. 
DEFEATED  IN  THE  SENATE. 


Immediately,  the  Santa  Fe  and  the  South- 
em  Pacific  restored  the  rates  in  the  San 
Joaquin  Valley  generally  to  the  basis  that  had 
prevailed  before  the  merchants'  road  was 
built,  and  the  people  of  San  Francisco  dis- 
covered too  late  that  the  addition  of  a  new 
line  to  their  facilities  made  no  difference  in 
their  situation,  for  the  simple  reason  that  the 
Southern  Pacific  owned  $17,000,000  of  stock 
in  the  Santa  Fe  and  the  two  roads  had  a  close 
traffic  and  trackage  arrangement.  Two  roads 
with  but  a  single 
thought;  two  tariffs 
that  gouged  as  one. 
Among  the  pas- 
senger rates  that 
had  been  reduced 
by  the  merchants' 
road's  competition 
was  the  passenger 
rate  from  San  Fran- 
cisco  to  Fresno. 
This  had  been 
$5.90;  it  was  cut  to 
$3.75.  When  the 
merchants'  road 
was  sold,  the  old  rate 
of  $5.90  to  Fresno 
was  restored.  This 
was  in  March,  1900. 
Mr.  E.  B.  Edson 
brought  suit  to  test 
under  the  constitu- 
tion the  legality  of 
the  restored  rate, 
and  the  State  Board 
of  Railroad  Com- 
missioners joined 
him.  In  the  Su- 
perior Court  Judge 
George  H.  Bahrs 
gave  judgment  for 
Edson  and  the  com- 
missioners.  The 
Southern  Pacific  appealed,  and  on  May  23, 
1 901,  the  Supreme  Court  reversed  Judge 
Bahrs  and  remanded  the  case  for  a  new  trial.* 
On  the  retrial  in  the  lower  court  in 
July,  1904,  Judge  Frank  H.  Kerrigan  de- 
cided in  favor  of  the  railroad  company, 
holding  that  the  rate  had  never  been  re- 
duced. 

The  ground  for  this  decision  is  worth  not- 
ing. It  seems  that  when  the  Southern  Pacific 
reduced  the  rate  to  Fresno  to  $3.75,  it  issued 
a  new  form  of  ticket  good  only  for  the  day 

*  Edson  et  al.  versus  Southern  Pacific  Company,  133  Cal.,  25. 


320 


Hampton's  Magazine 


i 


of  issue.  The  old  style  of  ticket,  price  $5.90, 
and  good  for  six  months,  it  still  kept  on  sale. 
Nobody  ever  wanted  or  bought  the  old  style 
of  ticket  at  $5.90,  but  it  could  be  bought  if 
desired.  Hence,  in  Judge  Kerrigan's  opin- 
ion, there  had  been  no  reduction  of  rates. 

A   JUDGE   CRITICISES    THE    CONSTITUTION 

Edson  and  the  commissioners  now  ap- 
pealed. Chief  Justice  Beatty  wrote  the  de- 
cision of  the  Supreme  Court,  which  entirely 
upheld  the  railroad  company,  and  affirmed 
the  validity  of  the  $5.90  charge — not  because 
the  rate  had  not  been  lowered,  but  because 
it  "had  not  been  lowered  for  the  purpose  of 
competition  within  the  proper  construction 
of  the  constitution."  Judge  McFarland,  an 
associate  judge  of  the  Supreme  Court  and 
previously  a  Southern  Pacific  attorney,  con- 
curred with  Chief  Justice  Beatty,  but  added 
an  even  stronger  opinion  of  his  own,  in 
which  he  fiercely  attacked  Section  20  of 
Article  XII  of  the  constitution,  speaking  of  it 
as  containing  *'  a  drastic  and  ruinous  penalty." 

One  might  think  that  on  such  grounds  any 
law  anywhere  could  be  upset  at  any  time. 

Incidentally,  it  may  be  interesting  to  note 
that  Judge  Bahrs  was  retired  to  private  life 
at  the  end  of  his  term  and  Judge  Kerrigan 
was  elevated  to  the  Appellate  Court. 


JUDGE   GEORGE   H.   BAHRS.   WHO  GAVE  JUDG- 
MENT AGAINST  THE   RAILROAD  IN 
THE  FRESNO  RATE  CASE. 


2.  Among  the  choice  presents  the  four 
gentlemen  of  Sacramento  gathered  from  the 
United  States  was  a  land  grant  for  building 
a  railroad  from  Roseville,  eighteen  miles 
north  of  Sacramento,  to  Portland,  Oregon. 
This  grant  was  of  every  alternate  twenty 
square  miles  (ten  on  each  side  of  the  track) 
conditioned  u[)on  the  building  of  the  road 
the  entire  distance.  The  Congenial  Four 
built  only  as  far  as  Redding,  152  miles,  but 
they  took  possession  of  the  land  grant  for 
the  entire  projected  line  of  the  road. 

It  was  immensely  valuable  land,  compris- 
ing some  of  the  best  timber  on  the  continent. 
In  1882,  the  time  limit  for  completing  the 
road  had  long  expired  so  that,  except  for  the 
line  from  Sacramento  to  Redding,  the  grant 
was  forfeited.  To  reclaim  it  an  act  of  Con- 
gress was  necessary.  Every  attempt  to  pass 
such  an  act  and  to  return  to  the  public  the 
land  justly  belonging  thereto  was  defeated. 
The  four  gentlemen  had  no  more  right  to4:he 
land  than  they  iiad  to  the  Washington  monu- 
ment, but  they  held  it  nevertheless,  and 
reaped  millions  from  it. 

THE  UNITED  ST.\TES   SKNATK  COMES   TO  THE 
SOUTHERN   pacific's   ASSISTANCE 

In  the  election  of  1882,  Mr.  Barclay  Hen- 
ley, a  young  attorney  of  Santa  Rosa,  who  had 
studied  the  land  grant  (juestion,  was  nomi- 
nated for  Congress  on  a  platform  demanding 
that  the  forfeited  land  grants  should  be  re- 
turned to  the  public  domain.  On  this  issue 
he  was  elected  and  promptly  introduced  bills  * 
for  the  reclamation  of  the  forfeited  grants  of 
the  Roseville-Portland  line,  for  the  reclama- 
tion of  the  forfeited  land  grants  of  the  North- 
ern Pacific — colossal  grabs  that  have  some- 
how escaped  the  attention  they  deserve — and 
some  other  bills  having  similar  objects.  The 
Congenial  Four  bitterly  fought  the  bill  that 
sought  to  make  them  disgorge,  bringing  down 
Judge  Dillon  and  General  Roger  A.  Pryor 
from  New  York  to  argue  in  their  behalf  before 
the  Public  Lands  Committee  of  the  House, 
and  filling  the  lobbies  with  their  hired  men. 

But  Mr.  Henley  had  absorbed  the  whole 
subject  and  he  made  of  it  so  clean  and  mas- 
terly an  exposition  that  he  carried  the  House 
with  him.  After  a  time,  the  only  active  op- 
position he  encountered  was  from  the  late 
Thomas  B.  Reed,  of  Maine,  then  Speaker  of 
the  House.     When  the  vote  came  all  the  bills 

•  For  d»  p»rt»cul*riy  interesting  debate  on  the  first  of  these 
bills,  see  C«mgressitmal  Record,  Forty-eighth  ConKress,  _  First 
Session,  pp.  4814-^1,  The  pleas  made  in  behalf  of  the  niilroad 
are  a  remation  to  anyone  tnat  will  dig  them  out. 


The  Remedy  of  the  Law 


221 


I 


were  passed  by  large  majorities.  They  went 
next  to  the  Senate,  llierc  tJiey  were  promptly 
buried,  nor  could  any  ari;unteut  or  appeal  ever 
resurrect  them.  The  four  congenial  gentle- 
men remained  in  possession  of  the  land  to 
which  they  were  not  entitled,  and  it  is  to-day 
reflected  in  the  capitalization  of  the  Southern 
Pacific  Railroad  that  the  public  pays  ex- 
orbitant freight  and  passenger  rates  to 
sui)p{)rt. 

This  must  be  a  cheerful  thought  to  all 
of  us.  First  we  are  cheated  of  millions 
upon  millions  of  acres  of  our  lands,  rich 
in  those  natural  resources  we  are  now 
so  anxious  to  conserve;  next  we  pay 
freight  rates  on  the  value  of  the  land  that 
has  been  stolen  from  us;  then  as  the 
value  of  this  land  increases  with  the  in- 
crease of  population,  it  becomes  addi- 
tional capital  on  which  to  base  additional 
rates  to  lay  additional  burdens  upon  the 
ultimate  consumers,  85  per  cent  of 
whom  are  poor  or  very  poor.  The  finite 
mind  seems  incapable  of  a  grander 
concept. 

FRIENDS   HELP   THE   RAILROAD   TO    GRAB 
FIFTY    MILLION    ACRES    OF    LAND 

3.  But  the  land  grab  story  has  still  a  sequel 
not  less  delectable.  It  shows  how  even  the 
best  of  movements  for  the  public  benefit  may 
easily  be  twisted  into  further  advantage  for 
the  fortunate  and  further  burdens  for  the 
people  at  the  bottom. 

About  fifteen  years  ago  the  need  of 
conservation  began  to  be  forced,  very 
tardily,  upon  our  attention  by  the  obvious 
fact  that  we  should  shortly  be  without 
timber  as  without  public  lands.  Congress, 
therefore,  set  apart  regions  as  inalienable 
forest  reserves  for  the  nation.  An  honest 
man  in  the  Senate,  looking  over  the  proj- 
ect, saw  that  while  its  main  features  were 
admirable,  it  contained  one  defect  easily 
remedied.  It  did  not  j)rovide  for  the  cases 
of  men  that  had  settled  upon  the  land  seques- 
tered for  ])ublic  ])urposes.  That  is  to  say, 
in  the  middle  of  a  reserve  a  settler  might  be 
tilling  a  farm,  and  l)y  the  establishing  of  a 
forest  reserve  about  him  might  find  himself 
utterly  cut  olT  from  communication  with  the 
rest  of  the  world,  whereby  his  farm  would  be 
made  valueless. 

This  senator,  therefore,  introduced  a  meas- 
ure providing  that  any  dwellers  on  the  land 
taken  for  forest  reserves  should  have  the  right 
to  exchange  their  farms  for  an  equal  amount 


JUDGE    FRANK    H.    KERRIGAN.   WHO    t)ECIDED 

IN  THE  RAILROADS  FAVOR  ON  RETRIAL 

OF  THE  FRESNO  CASE. 

of  public  land  elsewhere.  This  just  and 
reasonable  amendment  fell  into  the  hands  of 
an  eminent  friend  of  the  Interests  in  the 
Senate  and  another  in  the  House.  They 
changed  the  words  "dwellers  on"  to  "holders 
of"  and,  at  the  last  minute  before  the  end  of 
the  session,  it  was  rushed  through  the  Senate, 
giving  no  chance  for  amendment. 

The  railroad  companies  immediately  took 
advantage  of  this  provision.  They  gave  up 
fifty  millions  of  acres  of  worthless  barrens  in 
Nevada  and  Arizona  where  nothing  ever  grew, 
or  ever  would  grow,  but  cactus  or  sage  brush, 
and  received  in  exchange  choice  timber  lands 
in  Oregon,  Northern  California,  and  Wash- 
ington, nor  could  any  protest  or  outcry  avail 
to  check  this  monstrous  fraud. 

Only  by  a  narrow  margin  did  they  fail  of 
getting  those  invalualile  coal  deposits  in 
Alaska  that  are  now  the  subject  of  a  national 
controversy.  They  had  planned  to  grab  all 
such  lands  but  found  they  were  stopped 
by  the  fact  that  the  homestead  law  did  not 
extend  to  Alaska.  Their  newspapers  in  all 
parts  of  the  country  then  began  to  demand 
amendment  of  the  law  so  that  Alaska 
should  be  thrown  open  to  homestead  entry. 
When    the    agitation    had    proceeded    long 


;822 


Hampton's  Magazine 


^^et^ 


CHIEF  JUSTICE   BEATTY,   OF  THE   CALIFORNIA 
SUPREME  COURT,  WHO  UPHELD  THE  RAIL- 
ROAD IN   THE   FRESNO  CASE. 

enough,  a  bill  to  this  effect  was  introduced 
in  Congress  and  slated  for  immediate  pas- 
sage. One  man,  Judge  Joseph  H.  Call,  of 
Los  Angeles,  well  known  as  an  opponent  of 
corporation  knavery,  discovered  what  was 
afoot  and  hastily  warned  a  group  of  honest 
Congressmen.  By  these  the  bill  was  so 
amended  as  to  exclude  the  railroads  from  the 
benefit  of  the  extension. 

Meantime,  those  choicest  timber  lands  in 
California,  Oregon,  and  Washington,  before 
referred  to,  had  been  obligingly  withheld 
from  entry.  When  the  railroad  company 
found  that  it  was  beaten  off  from  Alaska, 
the  timber  tract  was  as  opportunely  restored 
to  entry  and  the  railroad  companies  filed  for 
and  grabbed  it  all— about  50,000,000  acres. 
I  suggest  that  the  next  Conservation  Con- 
ference in  this  country  devote  itself  to  this 
little  fact. 

THE   VALUE   OF   REGULATION 

4.  But  to  return  to  the  experiences  of 
California.  And  here  I  come  upon  the  main 
story  I  desire  to  tell  because  it  illustrates  so 
sweetly  just  how  much  effect  rate  regulation, 
supervision,  Hepburn  bills,  strenuous  gentle- 
men, and  the  like  agencies,  can  have  upon 


railroad  companies  when  the  railroad  com- 
panies do  not  care  to  observe  such  trifles. 

Also  something  else.  It  illustrates  and 
shows  us  precisely  how  and  to  what  ex- 
tent you  and  I  and  all  of  us  pay  for  these 
fortunes;  pay  for  them  once  when  they 
are  made  and  then  the  interest  on  that, 
and  the  interest  on  that,  many  times 
over  until  the  dollar  we  paid  forty  years 
ago  for  Mr.  Huntington's  "  explana- 
tions "  to  Congressmen  has  become  two 
dollars  that  we  pay  year  after  year ;  until 
all  the  wealth  that  was  stolen,  filched, 
and  conveyed  from  any  one  of  these  en- 
terprises in  the  palmy  days  of  its  looting 
is  the  basis  of  a  bill  annually  presented 
to  us  and  for  which  we  must  dig  up  the 
money. 

If  the  looting  were  done  when  it  was  done 
and  we  were  rid  of  it  thereafter,  the  case 
could  not  be  so  bad.  But  every  dollar  of 
loot  in  any  railroad  enterprise,  all  the  bribe 
money  and  ''legal  expenses,"  the  jobs  in  the 
construction  accounts  and  the  swindle  in  the 
interlacing  leases,  become,  all  of  them,  just 
so  many  additions  to  the  capital  account  on 
which  interest  must  be  paid  through  the  rates 
that  come  home  to  us  all. 

With  this  little  preface,  necessary  to  make 
clear  the  true  meaning  of  the  characters  and 
incidents  we  shall  introduce,  we  are  now 
ready  for  our  story. 

THE  PEOPLE  APPOINT  A  POWERFUL  RAILROAD 
COMMISSION 

About  thirty  years  ago  this  idea  of  curing 
evils  by  regulating  them  laid  strong  hold 
upon  the  people  of  California,  and  in  the 
brave  new  constitution  of  1879,  to  which  we 
have  before  referred,  they  determined  to  deal 
once  and  for  all  with  the  railroad  monopoly 
question.  So  in  Section  20  of  Article  XII, 
they  gave  to  the  Board  of  Railroad  Commis- 
sioners every  conceivable  power  ''to  establish 
rates  of  charge  for  the  transportation  of  pas- 
sengers and  freight  by  railroad  and  other 
transportation  companies,"  to  supervise  and 
control  such  companies,  and  to  enforce  its 
will  upon  them.  For  failure  to  obey  the 
commissioners'  rulings  severe  penalties  were 
provided,  the  companies  to  pay  heavy  fines 
and  their  officers  to  be  punished  with  fine 
and  imprisonment.  The  section  concludes 
with  this  explicit  statement: 

In  all  controversies,  civil  and  criminal,  the  rates 
of  fares  and  freight  established  by  said  commission 
shall  be  deemed  conclusively  just  and  reasonable. 


The  Remedy  of  the  Law 


223 


The  force  of  regulation  could  no  farther 
go.  Even  the  so-called  Roosevelt  policies 
have  not  approached  this  achievement. 

Some  years  afterwards,  the  state  legislature, 
finding  that  for  some  reason  blessed  regula- 
tion did  not  produce  the  expected  good  things, 
tried  to  strengthen  the  commission's  hands 
with  the  majesty  of  statutes,  enacting  that 
whenever  the  commission  determined  upon 
a  rate  it  should  file  the  new  tariff  schedule 
with  the  railroad  company  affected,  and  that 
twenty  days  thereafter  the  new  rate  should 
go  into  effect  and  become  the  law  of  the  land. 

Although  it  possessed  these  uneqUaled  and 
ample  powers,  the  commission  never  did  a, 
blessed  thing  but  make  reports  and  draw  its 
several  salaries;  it  was  armed  with  thunder- 
bolts and  used  only  goose  quills.  Mr.  Hunt- 
ington wrote  once  to  General  Colton:  "I 
notice  you  are  looking  after  the  state  railroad 
commissioners.  I  think  it  is  time."*  Whether 
this  "looking  after"  had  any  relation  to  the 
prevailing  inertia,  the  reader  can  surmise  as 
well  as  I. 

But  it  appears  that  in  1894  there  was  one 
of  the  periodical  revolts  against  the  Southern 
Pacific  which  had  so  long  been  the  consti- 
tuted authority  and  government  of  the  state, 
and  this  treasonable  and  unruly  spirit,  seiz- 
ing upon  the  Democratic  party,  found  ex- 
pression in  the  following  resolution,  which 
the  Democratic  State  Convention  of  that  year 
embodied  in  its  party  platform: 

Resolved,  That  the  charges  for  the  transporta- 
tion of  freights  in  California  by  the  Southern  Pa- 
cific Company  of  Kentucky  f  and  its  leased  lines 
should  be  subjected  to  an  average  reduction  of  not 
less  than  twenty-five  per  cent,  and  we  pledge  our 
nonninees  for  Railroad  Commissioner  to  make  this 
reduction. 

You  must  recall  the  marvelous  and  perfect 
political  organization  of  the  Central  Pacific 
before  you  can  apprehend  the  force  of  the 
revolt  that  produced  this  resolution.  The 
truth  is  the  grain  growers  were  threatened 
with  ruin.  Some  of  them  were  supporting 
the  burden  of  heavy  mortgages.  From  their 
abundant  crops  the  railroad  was  filching 
most  of  the  profits.  They  were,  therefore, 
in  the  mood  of  men  not  to  be  trifled  with. 

No  doubt  the  passage  of  that  resolution 
was  a  treasonable  act  that  the  railroad's 
political  department  could  easily  have  pre- 
vented.    A  few  years  before  it  would  have 

♦Letter  of  March  7,  1877.  See  Hampton's  Magazine  for 
June,  1910,  p.  857. 

t  The  various  consolidations  cf  the  Central  Pacific,  Southern 
Pacific,  and  a  score  of  other  lines  had  been  merRed  into  a  com- 
pany bearing  this  name  incorporated  in  Kentucky,  March  17, 
1884. 


JUSTICE   McKENXA,   NOW  OF  THE  UNITED 

STATES  SUPREME   COURT.  WHO  HEARD 

THE  FAMOUS  GRAIN  RATE   CASE. 

done  so,  but  it  had  learned  that  regulative 
laws  and  constitutional  provisions  were  really 
ineffective,  and  besides,  there  was  the  mem- 
ory of  that  bloody  May  day  at  Brewer's 
Farm.  The  country  had  made  so  much  fuss 
about  the  killing  of  a  few  farmers;  "The 
Massacre  at  Mussel  Slough"  it  was  uni- 
versally called,  and  the  Southern  Pacific 
the  murderer  of  those  men.  It  was  not  nice 
for  professed  philanthropists  and  art  connois- 
seurs. Even  the  subsidized  editors  always 
gagged  a  little  about  Mussel  Slough. 

Evidently  there  was  a  point  of  endurance 
beyond  which  men  could  not  be  driven  with 
entire  safety  to  the  drivers.  Wisdom  and  ex- 
perience indicated  that  no  harm  could  come 
from  such  a  resolution  nor  from  a  campaign 
conducted  on  these  lines;  it  was  only  a  useful 
and  desirable  vent  for  public  clamor  that 
otherwise  might  have  worse  results. 

So  the  convention  nominated  its  candidates 
on  this  platform,  and  the  party  went  into  the 
campaign  with  at  last  the  similitude  of  an 
issue  to  fight  for.  The  state  that  year  was 
in  one  of  its  moods  for  a  change  from  the 
machine  that  had  a  Republican  name  to  the 
machine  that  had  a  Democratic  name,  and 


224 


Hampton's  Magazine 


two  of  the  three  Democratic  candidates  for 
railroad  commissioner  were  elected,  consti- 
tuting a  majority  of  the  Board. 

THE  people's  commission  TRIES  TO  REDUCE 
FREIGHT    RATES 

In  August,  1895,  seven  months  after  tak- 
ing office,  the  commissioners  reached  (one 
would  think  with  sufficient  deliberation)  the 
important  matter  of  freight  rates,  and  on 
September  12th  and  13th  adopted  two  reso- 
lutions, the  first  declaring  a  reduction  in 
grain  rates  of  not  twenty-five  but  eight  per 
cent,  and  the  other  expressing  an  opinion 
that  all  rates  should  be  reduced,  and  at  some 
time  the  commissioners  would  get  to  work 
and  reduce  them — perhaps  when  the  robins 
should  nest  again. 

To  this  lame  and  impotent  conclusion  came 
the  revolt  of  the  grain  growers  and  the  valorous 
resolve  of  the  Democratic  State  Convention. 

But  you  should  wait  a  little;  the  best  is 
yet  to  come.  This  is  a  very  famous  case  and 
tested  to  the  utmost  the  whole  power  of  the 
regulative  theory.  If  there  ever  were  in  the 
United  States  railroad  rates  that  ought  to  be 
reduced,  they  were  the  grain  rates  in  Cali- 
fornia; and  if  there  ever  could  be  anywhere 
a  force  able  by  law  and  constitution  to  reduce 
such  rates,  it  was  the  California  Board  of  Rail- 
road Commissioners. 

Whatever  rates  that  Board  might  decide 
upon  (said  the  constitution  of  the  state) 
should  be  valid  and  "in  all  controversies, 
civil  or  criminal,  the  rates  of  fares  and 
freights  established  by  said  commission  shall 
be  deemed  conclusively  just  and  reasonable." 

Note  what  happened. 

THE    REDUCTION    IS    ENJOINED 

The  railroad  company  went  straightway 
before  Judge  Joseph  McKenna,  then  of  the 
United  States  Circuit  Court,  now  of  the 
United  States  Supreme  Court,  and  on  Octo- 
ber 14th  obtained  a  temporary  injunction 
restraining  the  commission  from  carrying  out 
or  enforcing  the  reduction  it  had  declared.* 

Of  course.  The  United  States  Circuit 
Court  takes  precedence  over  authorities  con- 
stituted by  the  state. 

Soon  after,  the  case  came  up  again  on  a 
motion  to  continue  the  injunction  and  the 
issue  was  joined.  There  was  a  grand  array 
of  counsel — W.  F.  Herrin,  successor  of  "  Bill" 


*  The  title  is  the  Southern  Padfic  Company  versus  The  Board 
of  Railroad  Commissioners  of  the  State  of  California.  Number 
of  the  case,  12,127. 


Stowe  as  chief  solicitor  and  political  manager 
for  the  Southern  Pacific,  former  Judge  John 
Garber,  E.  A.  Pillsbury,  and  others  for  the 
distressed  railroad  company;  Attorney-Gen- 
eral Fitzgerald,  former  Judge  R.  Y.  Hayne, 
and  others  for  the  commissioners.  The  case 
lasted  for  more  than  a  year. 

the   railroad   pleads   poverty  and 
confiscation! 

The  plea  of  the  company  was  that  it  was 
too  poor  to  afiford  any  reduction  of  rates  and 
that  the  action  of  the  commissioners,  unless 
prevented  by  the  court,  would  so  injure  the 
company  and  decrease  its  revenues  that  it 
would  amount  to  the  confiscation  of  property 
expressly  prohibited  by  the  Constitution  of 
the  United  States  of  America. 

Please  note  this.  You  see  now  we  are 
coming  down  to  fundamentals.  Rates  could 
not  be  reduced  because  under  existing  condi- 
tions the  Constitution  of  the  United  States 
practically  forbade  them  to  be  reduced. 

To  show  the  extreme  poverty  of  the  com- 
pany were  adduced  many  figures. 

First,  there  was  the  capitalization  of  the 
company  and  of  its  constituent  companies, 
with  their  bonded  debt.  Then  there  was  a 
computation  showing  that  for  the  last  eight- 
een months  the  whole  company  (which  in- 
cluded lines  in  Oregon,  Arizona,  New  Mexi- 
co, and  elsewhere)  had  been  operated  at  a 
loss — on  this  capitalization.  Then  there  was 
a  list  of  certain  constituent  lines  of  the  South- 
ern Pacific,  to  wit:  the  Oregon  &  California, 
the  Central  Pacific,  the  California  Pacific,  the 
Northern  Railway,  the  Northern  California 
Railway,  the  South  Pacific  Coast  Railway, 
and  the  Southern  Pacific  of  California;  after 
which  the  bill  of  the  company  avers  as  follows: 

Fijth,  that  none  of  said  corporations,  other  than 
the  said  CaUfornia  Pacific  Railroad  Company  and 
the  said  Northern  Railway  Company,  have  for  more 
than  one  year  last  past  received  or  been  entitled  to 
receive  any  profit  or  net  income  whatsoever  above 
their  actual  expenses  or  any  compensation  for  the 
use  of  their  equipment  out  of  the  funds  payable  to 
them  by  your  orator  under  the  terms  of  said  leases 
or  otherwise,  nor  have  any  of  said  corporations  paid, 
or  been  able  to  pay,  any  dividends  to  their  stock- 
holders. 

This  is  dull  legal  verbiage,  but  I  want  to 
put  it  all  in  because  it  is  necessary  if  we  are 
to  determine  about  the  legal  control  of  these 
corporations. 

"  Under  the  terms  of  said  leases, "  says  Mr. 
Word  Spinner  of  the  company's  plea. 

What  leases? 


The  Remedy  of  the  Law 


225 


Why,  the  leases  of  the  constituent  com- 
panies one  to  another.  Each  of  these  con- 
stituent companies  was  made  up  of  many 
other  smaller  companies,  each  leased  in  turn 
to  a  larger  company,  until  there  was  a  grand 
collection  of  leases. 

Thus  the  California  Pacific  mentioned  in 
this  plea  was  a  constituent  company  leased  to 
the  Southern  Pacific,  and  the  California  Pa- 
cific was  itself  an  aggregation  of  smaller  roads 
covered  with  leases.  First,  there  was  the  old 
Marysville  &  Benicia,  organized  under  the 
act  of  1 85 1,  which  was  leased  to  the  San 
Francisco  &  Marysville  of  1857,  which  was 
leased  to  the  Sacramento  &  San  Francisco, 
which  was  leased  to  the  old  California  Pacific, 
which  was  leased  to  some  other  road  which 
was  leased  to  the  present  California  Pacific. 

The  commissioners  agreed  that  most  of 
these  leases  were  clearly  illegal  and  invalid, 
and  that  the  whole  Southern  Pacific  con- 
glomerate was  an  outlaw  and  pirate. 

Section  20,  Article  XII,  of  the  Constitution 
of  California  declares  that  no  railroad  com- 
pany, nor  other  carrier,  shall  combine  nor 
make  any  contract  with  any  other  company 
"by  which  combination  or  contract  the  earn- 
ings of  the  one  doing  the  carrying  are  to  be 
shared  by  the  other  not  doing  the  carrying." 

Which  was,  of  course,  precisely  the  situa- 
I    tion  created  by  most  of  these  leases. 

Law?  Well,  as  I  said  before,  there  is  no 
end  of  law.  Law  on  all  sides  of  us  steadily 
violated  by  this  corporation.  Nothing  but 
law.  As,  for  instance,  section  560  of  the  penal 
code  of  California  reads  as  follows: 

Every  director  of  any  stock  corporation  who  con- 
curs in  any  vote  or  act  of  the  directors  of  such  cor- 
poration, or  any  of  them,  by  which  it  is  intended 
either — (And  then  follows  a  list  of  prohibited  acts 
ending  with  this) : 

Fifth:  To  receive  from  any  other  stock  corpora- 
tion, in  exchange  for  the  shares,  notes,  bonds,  or 
other  evidences  of  debt  of  their  own  corporation, 
shares  of  the  capital  stock  of  such  corporation  or 
notes,  bonds  or  othjer  evidences  of  debt  issued  by 
such  corporation,  is  guilty  of  a  misdemeanor. 

And  before  a  committee  of  Congress  in 
1894,  testifying,  Mr.  Huntington,  President 
of  the  Southern  Pacific,  explicitly  admitted 
that  the  Southern  Pacific  Railway  of  Cali- 
fornia, of  which  he  was  also  President,  had 
done  this  identical  thing  thus  forbidden  by 
the  statute,  although  the  law  that  he  thus 
calmly  admitted  he  had  violated  had  never 
been  enforced  upon  him.* 

*  The  Southern  Pacific  Company  versus  The  Board  of  Railroad 
Commissioners.    Argument  of  former  Judge  Hayne,  p.  214. 


Why  do  we  have  laws  if  they  can  thus  be 
set  aside  at  one  man's  will? 

But  about  these  leases  of  the  subordinate 
roads.  The  Southern  Pacific  argued  that  it 
could  not  afford  to  reduce  the  grain  rate  be- 
cause all  its  roads  except  only  two,  the  Cali- 
fornia Pacific  and  the  Northern,  it  was  oper- 
ating at  a  loss,  and  that  the  small  profits  on 
these  were  needed  for  repairs  and  betterments. 

Then  please  observe. 

A.  All  of  these  roads  were  owned  by  the 
same  persons,  who  were  also  the  owners  of 
the  Southern  Pacific,  so  that  when  they  made 
one  of  these  leases  they  leased  their  own 
property  to  themselves. 

B.  The  rental  so  paid  by  one  road  to 
another  became  a  part  of  the  operating  ex- 
penses of  the  larger  road. 

C.  These  rentals  were  repeated  several 
times  and  were  usually  at  excessive  rates. 

D.  The  final  road  that  embodied  all  the 
small  roads  had  to  make  enough  to  pay  all 
the  rentals  (to  its  own  owners,  of  course) 
and  a  profit  besides  and  when  this  profit  was 
two  and  a  half  per  cent  the  point  was  raised 
that  it  was  a  profit  too  small  to  justify  any 
reduction  in  rates.* 

HOW   THE    LEASING    SYSTEM   WORKS 

The  process  may  be  illustrated  thus.  Let 
us  suppose  one  of  these  roads  to  be  composed 
of  four  subordinate  roads  successively  leased. 
The  first  is  one  hundred  miles  long.  It  is 
leased  for  one  hundred  thousand  dollars  a 
year  to  the  second  company,  which  builds 
fifty  miles  and  leases  itself  and  the  first  road 
to  a  third  company  for  two  hundred  thousand 
dollars  a  year.  The  third  company  adds 
fifty  miles  and  leases  itself  and  its  constitu- 
ents to  a  fourth  company  for  four  hundred 
thousand  dollars  a  year.  All  these  leases  are, 
in  reality,  held  by  the  same  persons.  It  is 
evident  that,  in  the  end,  they  have  two  hun- 
dred miles  of  track  on  which  the  leases  they 
hold  are  an  exorbitant  charge  upon  the  oper- 
ation of  the  road — to  be  paid  to  themselves.f 

In  other  words,  the  lease  is  simply  a  sub- 
terfuge to  conceal  profits  that  the  public 
must  furnish. 


*  ' '  They  own  the  California  Pacific  ;  thev  lease  it  to  themselves 
at  $600,000  a  year ;  then  they  add  the  $600,000  to  operating 
expensesand  showadeficit  of  $54,000  a  year."  Judge Hayne's 
argument,  p.  577. 

t  The  California  Pacific  with  a  total  value  of  $1,404,935  was 
leased  for  $600,000  a  year.  The  annual  rentals  of  some  of  the 
other  lines  was  almost  as  much  as  the  whole  value  of  the  prop- 
erty leased  and  there  was  a  fiction;  accepted  by  many  persons 
that  should  have  known  better,  tliat  above  these  monstrous 
rentals  there  must  still  be  profit  else  the  road  was  operated  at  a 
loss. 


226 


Hampton's  Magazine 


As  to  the  railroad's  poverty  again,  it 
averred  in  its  bill  of  complaint,  sworn  to 
October  ii,  1895,  that  for  the  year  ending 
December  31,  1894,  the  income  account  of 
all  its  lines  in  California  was  as  follows: 

Gross  earnings $20,783,157.04 

Interest 183,759. 12 

Rentals ...  26,572  .  23 

Total  receipts. $20,993,488.39 

From  which  was  to  be  deducted 

Operating  expenses,  renewals,  im- 
provements, et  cetera .  .  $13,320,417.52 

Taxes 659,002 .  10 

Rentals,  et  cetera 792,471 .21 

Interest  on  bonds 5,472,190.24 

Sinking  fund  payments 135,000.00 

Payments  to  the  United  States  for 

Central  Pacific 179,910.27 

Surplus  on  lines  in  California .         $434,497 .  05 

This  small  sum,  it  was  declared,  was  re- 
quired for  improvements  so  that  the  lines 
were  really  operated  without  a  profit. 

Reports  made  by  these  companies  to  the 
State  Railroad  Commission  have  a  somewhat 
different  look.  The  form  of  statement  re- 
quired by  the  state  commission  sets  forth 
the  total  income  from  all  sources,  and  the 


total  deductions  of  all  kinds,  and  the  remain- 
der is  called  the  net  income.  According  to 
these  statements,  the  business  of  the  Southern 
Pacific  lines  for  the  year  ending  June  30, 
1894,  showed  the  following  results: 

Lines  in  Calijornia  Net  Incomes 

Southern  Pacific $2,289,832.65 

California  Pacific. .      .    250,549.50 

Northern  Railway 400,058 .  19 

South  Pacific  Coast.     Leased No  operations 

Northern  California.     Leased No  operations 

Total $2,940,440 .  34 

Central  Pacific  in  and  out  of  the  state  $1,377,720.80 

Total  Net  Income $4,318,161.14 

How  this  coheres  with  the  railroad  com- 
pany's statement  in  its  bill  I  do  not  under- 
take to  say.  As  to  the  matter  of  dividends, 
of  which  the  company  averred  there  had  been 
none,  the  commissioners  swore  that  on  the 
Central  Pacific  dividends  had  been  paid  in 
1894  and  1895  and  had  been  kept  secret.* 

To  prove  its  poverty,  the  company  filed  a 
schedule  of  the  total  indebtedness  and  the 
interest  thereon;  also  of  the  capital  stock  of 
each  company;  and  averred  that  the  actual 
value  of  the  roads  exceeded  the  amount  of 
the  stocks  and  bonds. 

THE    WATER    IN    SIX    CALIFORNI.A.    RAILROADS 
$233,796,530 

Some  extremely  interesting  developments 
resulted.  The  law  of  California  requires  as- 
sessments to  be  made  on  the  full  cash  value 
of  property.  On  June  6,  1895,  four  months 
before  the  beginning  of  this  suit,  Mr.  A.  N. 
Towne,  General  Manager  of  all  the  Southern 
Pacific  lines,  filed  with  the  State  Board  of 
Equalization  (the  highest  taxing  body)  sworn 
statements  in  which  he  declared  the  full  cash 
value  of  all  the  franchises,  railways,  roadbeds, 
rails,  and  rolling  stock  of  each  of  the  South- 
ern Pacific  lines  in  California.  This  covered 
all  of  the  company's  property  except  such  as 
was  assessed  by  the  various  county  assessors. 
By  adding  the  amounts  sworn  to  by  Mr. 
Towne,  and  the  amounts  in  the  statements 
to  the  county  assessors,  the  actual  cash  value 
of  all  the  property  of  all  the  companies  (on 
their  own  statements),  including  their  state 
franchises  and  all  else,  was  easily  ascertained. 
This,  put  by  the  side  of  the  company's  state- 


WILLIAM    F.    HERRIN,    CHIEF    SOLICITOR    AND 
POLITICAL  MANAGER  FOR  THE  SOUTH- 
ERN PACIFIC  RAILROAD. 


*  These  were  the  dividends  promised  to  Sir  Rivers  Wilson 
after  he  had  investigated  the  Central  Pacific  in  behalf  of  the 
unfortunate  English  stockholders,  as  related  in  a  previous 
article.    See  Hampton's  Mag.wine,  May,  1910,  p.  616. 


I 


The  Remedy  of  the   Law 


227 


merits  in  the  bill,  made  a  startling  showing.  In  that  chain  of  cause  and  effect  there  was 

I  think  we  had  better  exhibit  it  all  together  not  a  flaw. 

as  thus:  Five  per  cent  on  the  $19,357,458  of  ficti- 

RAILROAD  VALUES  AS  THEY  ARE  AND  AS  THEY  ARE  PRETENDED 


Railroad  Line 


I 

Southern   Pacific   of 

California 

South   Pacific   Coast 

Railway 

Northern  California. 
Northern  Railway. .  . 

alifornia  Pacific. . . . 

entral  Pacific 


Total  Debt 

(Company's 

Showing) 


$43,652,400 

5,500,000 
1,074,000 
9,907,000 
6,825,500 
35,428,000 


Annual 
Interest 
Thereon 


$2,454,984 

220,000 

53,700 

546,940 

322,125 

1,908,054 


Capital  Stock 

(Company's 

Showing) 


$68,402,000 

6,000,000 

1,280,000 

12,896,000 

12,000,000 

67-275,500 


Total 

Capitalization 

(Company's 

Showing) 


>I  12,054,400 

11,500,000 

2,354,000 

22,803,000 

18,825,500 

102,703,500 


Actual  Cash 

Value  Shown 

from  the  Sworn 

Statement 


Amount  of 

Water  by  this 

Showing 


$16,119,232 

1,079,592 

175,000 

3,445,542 

1,404,935 
14,219,569 


595,935,168 

10,420,408 
2,179,000 
19,357,458 
17,420,565 
88,483,931, 


On  all  this  huge  volume  of  water  the  pub- 
^c  was  required  to  pay  the  rates  that  fur- 

lished  the  interest,  and  the  company  could  not 
afford  to  make  a  reduction  of  eight  per  cent  in 

le  grain  rates  that  were  throttling  the  farmer. 

LL    THE      FARMERS      ASKED     WAS      $100,000 
ANNUAL   RATE   REDUCTION 

How  much  of  actual  annual  reduction  in 
income  would  be  produced  by  this  reduction? 
How  much  would  the  company  lose  if  it 
allowed  the  new  schedule  to  go  into  effect? 

At  the  most — $100,000  a  year. 

Let's  look  into  that. 

One  hundred  thousand  dollars  a  year.  At 
five  per  cent,  the  annual  interest  on  the  water 
on  the  capitalization  of  only  one  line,  the 
South  Pacific  Coast,  would  be  more  than 
five  times  this  amount.  The  annual  interest 
on  the  water  in  the  capitalization  of  the  Cali- 
fornia Pacific  alone  would  pay' the  grain  rate 
reduction  more  than  six  times.  It  was  to 
support  this  fictitious  capitalization  that 
the  grain  rates  must  be  kept  up  and  the 
farmers  must  pay  and  the  bread  eaters 
must  pay  and  all  the  world  must  pay  this 
gross  and  swollen  capitalization,  $10,000,- 
000  in  one  line,  and  $80,000,000  in  an- 
other, and  $19,000,000  in  another,  all 
demanding  interest  on  the  bonds  and 
dividends  on  the  stocks. 

And  these  bonds  and  stocks  created  for  the 
profit  of  the  owners  of  the  road,  neatly  con- 
cealed by  the  leases  and  other  devices,  and 
representing  in  the  main  nothing  but  the 
greed  of  the  owners  and  the  fraud  of  their 
methods.  This  was  why  the  freight  rates 
were  high,  the  farmers  were  poor,  and  the 
cost  of  living  increased. 


tious  capitalization  in  the  Northern  Railway  is 
$967,872.90;  five  per  cent  on  the  actual  value 
of  the  Northern  Railway  is  $172,277,10.  Un- 
der the  existing  conditions,  the  Northern 
Railway  must  earn  $968,000  a  year;  if  it  were 
capitalized  for  its  real  value,  it  need  earn  only 
$173,000,  and  it  could  reduce  its  grain  rates 
and  all  other  rates  much  more  than  eight  per 
cent  and  still  make  its  five  per  cent.  What  the 
people  of  California  and  the  people  elsewhere 
were  paying  for  was  not  a  reasonable  profit 
on  an  investment,  but  an  unreasonable  profit 
on  a  scheme  of  fraud;  and  as  a  matter  of  fact 
the  only  confiscation  involved  in  the  proposed 


JUDGE  JOSEPH  H.  CALL,  WHO  HELPED  TO  SAVE 
ALASKA  FROM  THE  EXPLOITING  RAILROADS. 


228 


Hampton's  Magazine 


reduction  was  the  confiscation  of  a  piece  of 
the  apparatus  of  a  gigantic  shell  game. 

PLEASE  READ  CAREFULLY  THIS  ANALYSIS  OF 
SOME   OF   THE    "  WATER" 

Take  some  of  this  capitalization  on  which 
the  railroad  company  demanded  "a  reason- 
able profit,"  and  see  its  substance. 

Into  that  capitalization  was  charged,  for 
instance,  the  $2,840,000*  that  the  Central 
Pacific  paid  to  the  Union  Pacific  for  the  over- 
lapping lines  when  the  two  roads  were  en- 
gaged in  their  insane  race  for  mileage. 
Twenty-five  years  had  passed  since  that 
strange  exhibition  of  frenzied  competition. 
On  this  $2,840,000  at  six  per  cent  for  twenty- 
five  years  the  interest  would  be  $4,260,000, 
making  with  the  principal,  $7,ioo,ooo.f  On 
this  again  the  annual  interest  is  $426,000, 
and  the  commission  asked  for  only  $100,000 
a  year  reduction  in  freight  rates. 

In  those  early  days  of  the  Central  Pacific, 
there  was  spent  at  Washington  and  Sacra- 
mento $6,532,329  for  corruption  disguised  as 
"legal  expenses,"  and  this  went  into  the  capi- 
talization on  which  the  farmers  must  pay 
and  the  bread  eaters  must  pay  and  all  the 
world  must  pay.  At  six  per  cent  interest 
for  twenty-five  years  this  would  amount  to 
$9,7.98,493.50.  If  that  sum  were  applied  to 
reducing  the  debt  of  the  company,  the  annual 
saving  in  interest  would  be  $587,909.61 — and 
the  commission  asked  for  only  $100,000 
from  the  railroad,  t 

Again:  Before  the  Pacific  Railroad  Com- 
mission,! E.  H.  Miller,  Jr.,  secretary  of  the 
company,  gave  a  tabulation  showing  that 
from  1873  to  1884  (when  the  road  was  sold 
to  the  unfortunate  English  investors  and  the 
profits  were  suppressed)  the  dividends  paid 
on  Central  Pacific  stock  amounted  to  $34,- 
308,055.  The  net  earnings  of  the  road 
from  its  completion  to  December  31,  1886, 
amounted  to  $59,276,387.54.  In  the  first 
seven  years  ending  with  1876,  the  owners 
had  received  $18,000,000  in  dividends  be- 
sides the  enormous  outside  profits  in  bonds, 
land  grants,  construction  graft,  other  graft, 
expense  accounts,  and  leases. 

*  Pacific  Railroad  Commission  Report,  p.  3039. 

t  Mr.  W.  F.  Herrin,  chief  counsel  for  the  railroad,  said  in  his 
argument  at  p.  112:  "The  money  expended  by  these  people 
legitimately  and  honestly  for  the  speedy  construction  of  this 
road  cannot  be  ignored.  There  is  no  equity  on  the  jjart  of  the 
State  of  California  to  insist  on  striking  out  and  eliminating  a 
single  dollar  that  was  actually  expended  in  the  construction  of 
the  road.    It  was  a  legitimate  investment." 

i  Mr.  Herrin  in  his  argument  (p.  i3g)  declared  that  the 
operation  of  the  roads  would  be  discontinued  if  the  reduction 
were  enforced. 

§  See  report,  p.  2547. 


If  from  1870  to  1876  they  had  been  con- 
tent to  take  one  third  of  the  net  income  for 
their  emoluments,  each  of  them  would  have 
received  $222,000  a  year  for  each  of  those 
years;  and  if  they  had  applied  the  remaining 
two  thirds  of  the  net  earnings  to  the  reducing 
of  the  company's  debt,  they  would  have  can- 
celed $12,000,000  of  that  debt. 

On  $12,000,000  for  twenty  years  the  in- 
terest at  six  per  cent  is  $14,400,000,  which 
would  be  the  .saving  effected  by  1896.  The 
annual  saving  in  interest  charge  would  be 
$720,000  if  for  the  first  seven  years  of  its  ex- 
istence the  owners  of  the  road  had  been  con- 
tent with  $222,000  a  year  each  from  the  net 
profits  of  its  operations.  A  careful  man  can 
always  sustain  life  on  $222,000  a  year.  And 
then — $720,000  a  year  of  saved  interest 
charges!  All  the  farmers  asked  was  that 
$100,000  a  year  should  be  dropped  from  the 
incalculable  loot. 

Instead  of  being  content  with  $222,000  a 
year  for  seven  years,  the  Congenial  Four  of 
Sacramento  grabbed  off  in  that  time  and 
divided  $18,000,000  of  profits  (from  the 
road's  operation  alone),  and  then  made  of 
their  monstrous  profits  and  of  the  debt  they 
would  not  pay  a  basis  for  charging  extor- 
tionate rates,  and  next,  in  court,  a  basis  for 
defending  those  rates. 

It  seems  hard  to  go  in  imagination  beyond 
this  triumph  of  impudence. 

Or  to  take  another  illustration:  If  down 
to  1884  the  owners  had  been  content  to  di- 
vide among  themselves  yearly  one  third  of 
the  net  profits  and  to  apply  the  rest  to  pay 
the  road's  just  debts,  they  would  by  that  time 
have  shared  $11,436,018  from  the  road's 
operations  aMne  and  would  have  saved  for 
the  road  to  1884,  $22,877,037.  By  the  time 
the  grain  rate  suit  was  brought  this  would  be 
$39,339,901,  on  which  the  annual  interest 
would  have  been  $2,360,394.  And  all  the 
farmers  asked  was  that  $100,000  a  year  should 
be  taken  from  the  load  that  they  bore. 

And  again:  From  the  testimony  taken  be- 
fore the  Pacific  Railroad  Commission  it  ap- 
peared that  the  $62,000,000  of  issued  capital 
stock  of  the  Central  Pacific  Railroad  Com- 
pany was  divided  among  the  four  gentlemen 
as  a  free  gift,  and  the  four  gentlemen  paid  not 
a  cent  of  it,  and  that  this  $62,000,000  was 
part  of  the  capitalization  on  which  interest 
must  be  paid  by  means  of  charges  levied  upon 
the  public* 

*  See  pages  2646,  2670,  and  2377,  testimony  of  Leland  Stan- 
ford and  Edward  H.  Miller,  Jr. 


I 


The  Remedy  of  the  Law 


229 


And  it  appeared  that  all  the  bonds  fraudu- 
lently taken  from  the  government  at  the 
mountain  rate,  $48,000*  a  mile,  when  the  ac- 
tual construction  was  on  level  ground,  all 
these  were  in  the  account  and  must  be  paid 
for  by  charges  levied  upon  the  public. 

And  it  appeared  that  all  the  bonds  fraudu- 
lently taken  from  the  government  at  the  foot- 
hill rate,  $32,000*  a  mile,  when  the  actual  con- 
struction was  on  level  ground,  all  these  were 
in  the  account  and  must  be  paid  for  by 
charges  levied  upon  the  public. 

And  it  appeared  that  all  the  money  fraudu- 
lently taken  by  the  Contract  and  Finance 
Company  (owned  by  the  same  owners)  on 
excessive  and  extravagant  charges  for  con- 
struction and  repairs — all  that  was  in  the 
b capitalization  and  must  be  paid  for  year  after 
irear  by  charges  levied  upon  the  public. 
And  it  appeared  that  the  manipulation  by 
which  at  the  end  of  the  construction  period f 
the  Central  Pacific  owed  the  Contract  and 
Finance  $3,500,000  and  took  for  that  debt 
the  Central  Pacific's  notes  for  $5,700,000, 
and  subsequently  received  in  payment  for 
these  notes  $7,000,000  of  land  grant  bonds, 
that  all  this  graft  also  was  in  the  capitaliza- 
tion and  must  be  paid  for  by  charges  levied 
upon  the  public. t 

And  it  appeared  that  the  grafting  contract  § 
by  which  the  Contract  and  Finance  under- 
took to  make  repairs  on  the  Central  Pacific 
and  furnish  its  suppHes  and  thereby  raked 
off  $2,000,000  a  year  of  extra  profits — that  all 
this  was  in  the  capitalization  and  must  be 
paid  for  year  after  year  by  charges  levied 
upon  the  public. 

And  it  appeared  that  all  the  graft  secured 
under  the  aliases  of  the  Western  Develop- 
ment Company  and  the  Pacific  Improvement 
Company,  all  the  excessive  bond  issues, 
fraudulent  construction  charges,  and  mag- 
nified costs,  all  these  were  included  in  the 
capitalization  and  must  be  paid  for  year  after 
year  by  charges  levied  upon  the  public. 

And  it  appeared  that  when  the  Western 
Development  Company  and  the  Pacific 
Improvement  Company  raided  the  sinking 
fund  of  the  Central  Pacific  Company,!  that 
here  were  items  of  cost  that  went  into  the 
capitalization   and   must   be   paid   for  year 

*  Pacific  Railroad  Commission  Report,  p.  3662. 

'\  Ibid.,  p.  2682,  testimony  of  W.  E.  Brown. 

i  Judge  Hayne's  argument,  p.  509. 

§  Pacific  Railroad  Commission  Report,  p.  3227,  testimony 
of  Lewis  M.  Clements. 

Wllnd.  Testimony  of  C.  P.  Huntington,  p.  32;  testimony  of 
Leland  Stanford,  p.  2665.  In  the  present  case.  Judge  Hayne's 
argument  at  p.  512. 


after  year  through  charges  levied  upon  the 
public. 

And  it  appeared  that  when  suits  were 
brought  that  threatened  in  a  painful  way  the 
reputations  of  the  gentlemen  involved  in 
these  operations  and  they  bought  back  at 
400  and  500  and  1 700  the  stock  they  quoted 
at  80,  these  expenditures  also  went  into  the 
capitalization.  And  when  the  directors  of 
the  company  hired  writers,  newspapers,  and 
magazines  to  praise  them  and  their  work,  or 
to  favor  legislation  in  behalf  of  the  Central 
Pacific,  these  expenditures  also  went  into  the 
capitalization. 

And  it  appeared  that  the  real  purj^ose  of 
the  Contract  and  Finance  Company  and  the 
Western  Development  Company,  and  the 
Pacific  Improvement  Company,  and  all  the 
other  aliases  and  disguises  of  these  gentlemen 
was  to  effect  exactly  this  result,  to  transform 
the  expenditure  into  a  fixed  charge  upon 
the  public  that  should  endure  for  the  profit 
of  the  four  gentlemen;  and  that  all  these 
charges  could  be  paid  only  in  transportation 
rates;  and  that  because  of  all  these  accumu- 
lated charges  and  piled-up  accretions  of 
fraud,  the  grain  rates  must  be  exacted  and 
the  farmers  must  pay  and  the  bread  eaters 
must  pay  and  all  the  world  must  pay. 

And  it  appeared  that  there  was  no  end  to 
these  charges.  That  whenever  the  great 
power  that  gripped  and  held  in  its  fist  the 
State  of  California,  extended  in  any  way  its 
operations  or  acquired  additional  lines  or 
bought  a  .steamship  or  built  a  branch  or 
spent  money  for  legislation  or  made  an  im- 
jjrovement  or  paid  a  rebate  or  made  an 
illegal  lease  or  straightened  its  corkscrew 
track,  it  piled  up  more  capitaHzation,  which 
meant  more  interest  and  dividends  to  be  met, 
which  meant  more  charges  to  be  paid  by  the 
public. 

SEQUEL  OF  THE  BRAVE  ATTEMPT  TO  CURE 
BY  BLESSED  REGULATION 

And  it  appeared  that  when  the  Central 
Pacific  defrauded  the  nation  by  building  a 
crooked  road,  the  public  paid  charges  on  the 
crookedness;  and  when  these  crooked  places 
were  made  straight,  the  public  paid  charges 
for  making  them  straight.  Whatever  the 
railroad  company  did  produced  more  capi- 
talization, and  all  the  capitalization  produced 
interest  and  dividends  to  be  met,  and  all  the 
interest  and  dividends  meant  charges  levied 
upon  the  public.  And  at  the  other  end  of 
this  infallible  mill  stood  the  owners  issuing 


230 


Hampton's  Magazine 


the  excessive  securities,  and  adding  the  pro- 
ceeds to  their  huge  hoards. 

Many  of  these  matters  were  set  forth  with 
great  force  and  skill  by  the  attorneys  for 
the  railroad  commission.  The  railroad  com- 
pany, by  its  learned  counsel,  excepted  to  cer- 
tain features  of  the  commissioners'  answer, 
and  by  order  of  the  court  they  were  stricken 
out.  One  of  the  excised  sections  contained 
some  of  the  extraordinary  revelations  of  the 
tax  statement  before  referred  to.  In  another 
place,  Paragraph  IX  of  the  commissioners' 
answer,  occurs  this  significant  passage: 

That  it  is  notoriously  true  that  for  many  years 
last  past  the  complainant  has  expended  large  sums 
of  money  in  the  employment  of  politicians  and  others 
to  improperly  influence  various  branches  of  the 
Federal  and  State  Government  and  to  obtain  for 
themselves  [itself]  advantages  to  which  it  was  not 
entitled;  and  to  induce  action  on  the  part  of  various 
branches  of  the  public  service  for  the  sake  of  its  own 
private  advancement  and  for  that  of  its  officers,  and 
that  a  large  part  of  the  sums  claimed  by  it  as  operat- 
ing expenses  are  for  such  unlawful  expenditures. 

From  this  the  court  ordered  to  be  stricken 
out  the  words  that  "it  is  notoriously  true." 

Judge  McKenna's  decision  was  filed  No- 
vember 30,  1896.  In  his  accompanying 
opinion  he  confined  himself  chiefly  to  the 
constitutional  aspects  of  the  case  and  to 
precedent  and  previous  decisions.  He  found 
that  for  the  year  1894  the  Pacific  System  of 
the  Southern  Pacific  had  been  operated  at  a 
loss  of  $276,262.70,  that  the  company  could 
not  afford  to  make  the  reduction  of  rates 
ordered  by  the  commissioners,  and  that  the 
reduction  would  be  such  confiscation  of 
property  as  was  prohibited  by  the  Constitu- 
tion of  the  United  States.  The  clause  of  the 
California  Constitution  upholding  rates  to  be 
promulgated  by  the  commissioners  he  de- 


clared to  be  null  and  void*  for  similar  reasons, 
and  he  therefore  continued  the  injunction 
and  knocked  out  the  proposed  reduction. 

In  this  view  Judge  McKenna  was  in  exact 
accord  with  the  decisions  of  the  Supreme 
and  other  courts,  for  the  fact  seems  to  be 
that  under  the  Constitution  and  the  system 
of  business  that  we  have  adopted,  no  other 
decision  is  possible.  Capital  is  capital;  capi- 
tal is  entitled  to  just  and  reasonable  profits; 
courts  cannot  inquire  minutely  as  to  the 
methods  by  which  capitalization  is  piled  up; 
and  once  having  saddled  ourselves  with  this 
burden,  we  must  continue  to  bear  it  so  long 
as  the  securities  exist. 

It  only  remains  to  say  that  in  1898  a  new 
Board  of  Railroad  Commissioners  was  elect- 
ed, that  on  April  24,  1899,  this  new  board 
rescinded  the  grain  reduction  resolution  en- 
joined by  Judge  McKenna,  and  on  May  19th 
the  railroad  company  graciously  consented 
that  the  case  be  dismissed.  Which  ended  the 
last  attempt  of  the  grain  growers  to  utilize 
Regulation's  artful  aid  in  their  behalf.  They 
submitted  to  their  fate,  and  after  a  time  most 
of  the  wheat  fields  were  put  to  other  purposes. 

But  if  we  really  desire  to  learn  just  why  the 
cost  of  living  has  increased  so  heavily  upon 
us,  and  just  why  it  threatens  to  become,  be- 
fore long,  an  insupportable  condition,  our 
investigation  need  go  no  further  than  this. 

The  history  of  the  Southern  Pacific  is  not. 
very  different  from  the  history  of  other  rail- 
roads in  the  United  States. 

Who  pays  the  vast  interest  charges 
on  the  nine  billion  dollars  of  fictitious 
capitalization  that  these  railroads  have 
piled  up? 

*The  Southern  Pacific  Company  versus  The  Board  of  Rail- 
road Commissioners.     Judge  McKenna's  decision,  p.  2. 


THE  HARBOR  OF  LOS  ANGELES  AT  SAN  PEDRO,  SECURED  AFTER  AN   EIGHT 
YEARS'  FIGHT  AGAINST  THE  SOUTHERN  PACIFIC. 


The  Railroad  Machine  as  It 

Works  Now 

By  Charles  Edward  Russell 

Author  of  ''The  Heart  of  the  Railroad  Problem,''  ''Beating  Men  to  Make  Them  Good,"  etc. 

Portraits  by  S.  G.  Cahan 

Editorial  Note. — To  every  man  who  buys  a  pound  of  steak,  a  pair  of  shoes,  a  bag  of 
flour,  the  increased  cost  of  living  is  daily  a  more  vital  problem.  '  If  you  w^ant  to  solve  a  problem  in 
mathematics  you  have  to  know  what  is  called  one  of  the  factors.  Well,  one  of  the  factors  in  the 
increased  cost  of  living  is  railroad  rates.  And  we  have  come  to  understand  that  railroad  rates 
are  too  often  excessive.  In  the  follovsnng  article  Mr.  Russell  clearly  states  how  and  why  this 
is  so  in  the  case  of  the  Southern  Pacific  Railroad,  and  that  the  case  of  the  Southem  Pacific 
Railroad  is,  in  some  degree,  the  case  of  every  railroad  in  the  country. 


As  to  the  specific  cause  of  the  increased  cost  of 
living,  President  Taft  to-day  frankly  told  various 
of  his  callers  that  he  was  unable  to  account  for  it. — 
News  dispatch  from  Washington,  December  30, 1909. 

"HTHE  railroads  of  to-day  ought  not  to 

1     be  judged  by  the  past." 

So  say  the  railroad  attorneys,  presidents, 
and  champions,  sitting  pleasantly  at  meat. 
So  dutifully  echoes  that  part  of  the  period- 
ical press  owned  or  controlled  in  the  rail- 
road interest. 


I  doubt  not  all  of  us  would  be  glad  to 
accept  and  to  follow  the  injunction  if  only 
we  could;  but  to  separate  the  railroad  of 
to-day  from  its  past  is  like  separating  the 
living  tree  from  its  root. 

The  railroad  company  of  to-day  is  an  ac- 
cretion of  railroad  companies  of  the  past; 
the  railroad  management  of  to-day  is  an 
inheritance  from  the  railroad  management 
•  of  the  past;  the  railroad  capitalization  of 
to-day  has  been  built  upon  years  of  devious 
364 


Chantecler 


363 


The  Pheasant  Hen  {furiously,  tearing 
down  the  cobweb  with  a  brush  of  her  wing) : 
Be  still,  hateful  Spider! — Oh,  may  he  perish 
for  having  disdained  me! 

The  Woodpecker  (who  from  his  win- 
dow has  been  watching  Chantecler's  de- 
parture, suddenly,  frightened) :  The  poacher 
has  seen  him! 

The  Owls  {in  the  frees) :  The  Cock  is  in 
danger! 

The  Woodpecker  {leaning  out  to  see 
better):  He  breaks  his  gun  in  two! 

Patou  {alarmed):  To  load  it!  Is  that 
murderous  fool  in  sheepskin  gaiters  going 
to  fire  upon  a  rooster? 

The  Pheasant  Hen  {spreading  her  wings 
to  rise) :  Not  if  he  sees  a  pheasant ! 

Patou  {springing  before  her):  What  are 
you  doing? 

The  Pheasant  Hen:  Following  my  call- 
ing! [She  flies  toward  the  danger. 

The  Woodpecker  {seeing  that  in  her 
upward  swing  she  must  touch  the  spring  of 
the  forgotten  snare) :  Look  out  for  the  snare ! 
{Too  late.     The  net  falls.) 

The  Pheasant  Hen  {utters  a  cry  of 
despair):  Ah! 

Patou:  She  is  caught! 

The  Pheasant  Hen  {struggling  in  the 
net) :  He  is  lost ! 

Patou  {wildly):  She  is —    He  is 

[All  The  Rabbits  have  thrust  out  their 
heads  to  see. 

The  Pheasant  Hen  {crying  in  an  ardent 
prayer):  Daybreak,  protect  him! 

The  Owls  {rocking  themselves  gleefully 
among-the  branches):  The  gunbarrel  shines, 
shines 

The  Pheasant  Hen:  Dawn,  touch  the 
cartridge  with  your  dewy  wing.  Trip  the 
foot  of  the  hunter  in  a  tangle  of  grass!  He 
is  your  Cock!  He  drove  off  the  darkness 
and  the  shadow  of  the  Hawk!  And  he  is 
going  to  die.  Nightingale,  you  say  some- 
thing !     Speak ! 

The  Nightingale  {in  a  supplicating  sob) : 
He  fought  for  a  friend  of  mine,  the  Rose! 

The  Pheasant  Hen:  Let  him  live!  And 
I  will  dwell  in  the  farmyard"  beside  the 
plowshare  and  the  hoe!  And  relinquishing 
for  his  sake  all  that  in  my  pride  I  made 
a  burden  and  torment  to  him,  I  will  own, 
O  Sun,  that  when  you  made  his  shadow  you 
marked  out  my  place  in  the  world!  [Day- 
light grows.  On  all  sides  rustles  and  mur- 
murs. 


The  Woodpecker  {singing):  The  air  is 
blue! 

A  Crow  {cawing  as  he  flies  past):  Day- 
light grows! 

The  Pheasant  Hen:  The  forest  is  astir! 

All  the  Birds  {waking  among  the  trees) : 
Good  morning!  Good  morning!  Good 
morning!    Good  morning!    Good  morning! 

The  Pheasant  Hen:  Everyone  sings! 

A  Jay  {darting  past  like  a  streak  of  blue 
lightning) :  Ha,  ha ! 

The  Woodpecker:  The  jay  shakes  with 
Homeric  laughter. 

The  Pheasant  Hen  {crying  in  the  midst 
of  the  music  of  the  morning):  Let  him  live! 

The  Jay  {again  darting  past):  Ha,  ha! 

A  Cuckoo  {in  the  distance):  Cuckoo! 

The  Pheasant  Hen:  I  abdicate! 

Patou  {lifting  his  eyes  heavenward):  She 
abdicates! 

The  Pheasant  Hen:  Forgive,  O  Light, 
to  whom  I  dared  dispute  him!  Dazzle  the 
eye  taking  aim,  and  be  victory  awarded,  0 
Sunbeams 

The  Jay  and  the  Cuckoo  {far  away): 
Ha!  Cuckoo! 

The  Pheasant  Hen:  — to  your  powder 
of  gold —  {A  shot.  She  gives  a  sharp  cry, 
ending  in  a  dying  voice) — over  man's  black 
powder!  {Silence.) 

Chantecler's  Voice  {very  far  away): 
Cock-a-doodle-doo ! 

All  {in  a  glad  cry) :  Saved ! 

The  Rabbits  {capering  gayly  out  of  their 
burrows):  Let  us  turn  somersaults  among 
the  thyme! 

A  Voice  {fresh  and  solemn,  among  the  trees): 
O  God  of  birds! 

The  Rabbits  {stopping  short  in  their 
antics,  stand  abruptly  still,  soberly):  The 
morning  prayer! 

The  Woodpecker  {crying  to  The  Pheas- 
ant Hen)  :  They  are  coming  to  examine  the 
trap. 

The  Pheasant  Hen  {closes  her  eyes  in 
resignation) :  So  be  it ! 

The  Voice  in  the  Trees: 

God,  by  whose  grace  we  wake  to  this  new  day 

Patou  {before  leaving) :  Hush !  Drop  the 
curtain!   Men  folk  are  coming!     {Off.) 

[All  the  woodland  creatures  hide.  The 
Pheasant  Hen,  left  alone,  and  held  down  by 
the  snare,  with  spread  wings  and  panting 
breast,  awaits  the  approach  of  the  giant. 


Curtain. 


The  Railroad  Machine  as  It  Works  Now 


365 


policy;  the  railroad  rates  of  to-day  reflect 
forty  years  of  scheming  and  looting. 

If  the  railroad  companies  would  cease  to 
operate  their  political  departments  in  the 
! manner  of  1878  and  1884;  if  they  would 
cease  to  build  fictitious  capital  on  the  ficti- 
itious  capital  of  previous  years;  if  they  could 
avoid  as  a  basis  of  rates  the  necessity  of 
;  getting  interest  and  dividends  on  this  fic- 
titious capital,  we  could  possibly  afford  to 
forget  the  past  and  its  records. 

We  must  look  back  to  the  past  because 
[we  are  paying  for  the  past.  Three  times 
a  day  the  past  comes  to  our  tables  and  col- 
:  lects  its  toll. 

The  manner  of  this  collection  we  shall 
:  now,  if  you  please,  proceed  to  see,  and  also 
to  see  how  utterly  futile  and  absurd  are, 
and  must  be,  all  attempts  to  deal  with  the 
American  railroad  problem  by  doctoring 
symptoms  with  legal  remedies,  even  when 
these  are  most  justly  grounded  and  ably 
;  enforced. 

You  remember,  no  doubt,  the  $27,500,000 
'of  subsidy  bonds  that  the  United  States 
Government  issued  and  bestowed  upon 
Messrs.  Stanford,  Huntington,  Hopkins,  and 
Crocker,  to  facilitate  the  building  of  the 
Central  Pacific. 

These  bonds  were  to  fall  due  thirty  years 
after  the  completion  of  the  road. 

The  road  was  completed  in  1869-70. 
The  bonds  became  due  in  1900. 

Originally,  the  government  stipulated  that 
the  railroad  company  should  pay  the  semi- 
annual interest  on  these  bonds,  and  the 
principal  when  due. 

The  company  refused  to  pay  the  semi- 
annual interest  and  got  from  the  Supreme 
Court  a  decision  that  it  need  not  pay  this 
interest  until  it  paid  the  principal.  This 
obliged  the  United  States  to  advance  the 
semiannual  interest  from  the  treasury, 
which  amount  was  charged  against  the  com- 
pany. 

In  1887  the  Pacific  Railroad  Commission 
was  appointed  to  investigate  the  condition 
of  the  company  and  discover  what  use  it 
had  made  of  its  resources  and  income,  a 
reasonable  inquiry  in  view  of  its  repeated 
statements  that  it  was  too  poor  to  pay  the 
interest  it  owed,  and  would  be  too  poor  to 
pay  the  principal. 

After  listening  to  much  astounding  testi- 
mony of  a  nature  extremely  damaging  to 
the  company,  the  commission  made  two 
reports.     The  majority  dealt  lightly  with 


the  offenses  that  had  been  revealed.  Gov- 
ernor Pattison,  the  minority  member,  re- 
turned a  stinging  indictment  of  Messrs. 
Stanford,  Huntington,  Hopkins,  and  Crock- 
er, and  urged  the  government  to  forfeit 
the  company's  charter  for  fraud  and  dis- 
honesty. 

Nothing  was  done  on  either  report. 

AMBROSE   BIERCE   DEFEATS   HUNTINGTON 

In  1896,  the  time  for  payment  being  close 
at  hand,  the  debt  to  the  government  was 
apparently  more  than  $60,000,000,  and  the 
company's  attorneys  and  representatives 
made  no  secret  of  its  intention  to  default 
on  this  debt. 

PubUc  sentiment  demanded  that  some 
arrangement  should  be  made.  Mr.  Hunt- 
ington was  still  hovering  about  Congress 
with  his  agents  and  lobbyists.*  He  pre- 
pared a  bill  that  provided  for  the  refunding 
of  the  debt  into  bonds  bearing  two  per  cent 
interest  and  payable  a  period  estimated  at 
eighty  years  from  date. 

This  bill  was  slated  for  passage  by  the 
Republican  machine  to  which  Mr.  Hunt- 
ington had  always  contributed  liberally. 

Everybody  knew  that  the  bill  was  to  be 
jammed  through  and  Mr.  Huntington  was 
greatly  pleased  with  the  prospect. 

He  had  reason  to  be  pleased.  The  bill 
settled  all  differences  with  the  government, 
and  put  off  the  day  of  payment  so  far  that 
it  probably  would  never  come. 

Mr.  Huntington's  pleasure  was  of  short 
life.     It  was  presently  upset  by  two  men. 

At  the  request  of  Mr.  William  Randolph 
Hearst,  Mr.  Ambrose  Bierce  went  to  Wash- 
ington, and  every  day  for  one  year  he  wrote 
an  article  exposing  the  rotten  features  of 
Mr.  Huntington's  bill. 

These  articles  were  extraordinary  exam- 
ples of  invective  and  bitter  sarcasm.  They 
were  addressed  to  the  dishonest  nature  of 
the  bill  and  to  the  real  reasons  why  the 
machine  had  slated  it  for  passage.  When 
Mr.  Bierce  began  his  campaign,  few  persons 
imagined  that  the  bill  could  be  stopped. 
After  a  time  the  skill  and  steady  persist- 
ence  of   the   attack  began  to  draw  wide 


•  The  Washington  correspondence  of  the  Chicago  Evening 
Post,  April  22,  1896,  contains  this  passage: 

"  The  most  pitiable  and  at  the  same  time  the  most  disgusting 
spectacle  that  now  offends  the  national  capital  is  the  Huntington 
lobby.  The  list  of  paid  lobb3nsts  and  attorneys  now  numbers 
twenty-eight,  and  their  brazen  attempts  to  influence  Congress  to 
pass  the  Pacific  Railroad  Refunding  Bill  have  become  the  dis- 
grace of  the  session." 


366 


Hampton's  Magazine 


AMBROSE   BIERCE.   INSTRUMENTAL   IN   DE- 
FEATING THE  SOUTHERN  PACIFIC 
REFUNDING  BILL. 

attention.  With  six  months  of  incessant 
firing,  Mr.  Bierce  had  the  railroad  forces 
frightened  and  wavering;  and  before  the  end 
of  the  year,  he  had  them  whipped.  The 
bill  was  withdrawn  and  killed,  and  in  1898 
Congress  adopted  an  amendment  to  the 
general  deficiency  bill,  providing  for  the 
collection  of  the  Pacific  Railroad  subsidy, 
debts,  principal,  and  interest. 

This  may  be  held  to  be  as  wonderful  a 
victory  as  was  ever  achieved  by  one  man's 
pen,  and,  also,  one  of  the  most  remarkable 
tributes  to  the  power  of  persistent  pub- 
licity. What  it  meant  for  California  may 
be  judged  from  the  fact  that  when  news  was 
received  of  the  death  of  Mr.  Huntington's 
bill,  the  governor  proclaimed  a  public  holi- 
day, and  in  the  name  of  the  state  sent  a 
telegram  of  thanks  to  Mr.  Hearst. 

But  it  was  a  victory  destined  to  have  far 
more  memorable  results  than  these.  At 
once  the  railroad  company  abandoned  all 
hope  of  cheating  the  government,  and  re- 
sorted to  a  vast  and  difficult  feat  of  finan- 
ciering that  it  might  provide  for  the  pay- 
ment of  the  accumulated  debt.  For  months 
the  eyes  of  the  financial  world  were  fixed 


wonderingly  upon  this  slack  wire  adven- 
ture, which  was  regarded  in  some  quarters 
as  fraught  with  peril,  in  others  as  "a  clever 
and  ingenious  contrivance,"  and  on  all  sides 
as  a  new  chapter  in  high  finance. 
The  substance  of  it  was  this: 


HOW   THE    AMERICAN   PEOPLE    PAID   THE 
CENTRAL  pacific's   DEBT 

The  amount  due  to  the  government, 
less  deductions,  was  $58,800,000.  For  this 
the  company  gave  twenty  notes  of  equal 
amounts,  payable  semiannually  over  a  pe- 
riod of  ten  years,  bearing  interest  at  three 
per  cent  and  secured  by  an  equal  amount 
of  bonds. 

This  meant,  of  course,  an  increase  of  cap- 
ital. The  accrued  interest,  $30,700,000, 
had  been  due  to  the  government.  Instead 
of  paying  it  to  the  government,  the  Big  Four 
had  wrongfully  paid  the  money  to  them- 
selves in  dividends.  They  now  funded  the 
accumulated  debt  for  us  to  pay. 

There  was  next  prepared  a  new  issue  of 
Southern  Pacific  stock  and  a  new  issue  of 
four  per  cent  collateral  bonds.  Next  an  as- 
sessment of  $2  a  share  was  ordered  on  the 
old  Central  Pacific  common. 

But  to  offset  this  assessment,  the  new 
collateral  bonds  were  presented  free  to 
the  stockholders  to  the  amount  of  $16,- 
819,000. 

Then  the  stockholders  received,  share  for 
share,  $67,275,500  of  the  new  Southern  Pa- 
cific stock  on  which  six-per-cent  dividends 
were  to  be  paid — a  fine,  dividend-paying 
stock  exchange  for  a  stock  that  for  years  had 
been  inert  and  unprofitable. 

Next  a  new  Central  Pacific  Railway  Com- 
pany was  organized  in  Utah  to  succeed  the 
old,  and  the  original  part  of  the  Millionaire 
Mill  passed  from  pubUc  view  forever. 

The  $16,819,000  of  collateral  bonds  and 
the  $67,275,500  of  new  stock  made  $84,094,- 
500  of  securities  which  must  be  provided  for 
from  the  earnings.  Nominally,  the  total  in- 
crease in  the  capitahzation  was  $47,579,- 
000,  being  the  capitaHzed  interest  on  the 
government  debt  and  the  collateral  bonds; 
but  the  total  paper  capitalization  was  now 
$1 14,794,500,  and  all  of  it  became  interest  or 
dividend  bearing,  whereas  much  of  it  had 
previously  been  of  small  value. 

A  total  of  $114,794,500,  on  which  interest 
must  be  paid. 

We  are  paying  it. 


The  Railroad  Machine  as  It  Works  Now 


367 


Thus: 

Annual  dividends  on  the  stock,  6 

per  cent $4,036,530 

Collateral  bonds,  $16,819,000  at  4 

I    per  cent 672,760 
Capitalized  interest  on  government 
subsidy 1,200,000 
Total  annual  charge  on  us. . .  $5,909,290 
iWe  have   been   paying   this   for   eleven 
5ars.     So  far  we  have  paid  upon  this  ac- 
count $65,002,190. 

Then  this  is  the  way  our  account  stands 
to  date : 

Debt  of  the  railroad  to  the  gov- 
ernment    $58,800,000 

I  We  have  paid  because  of  the  re- 
funding of  that  debt 65,002,190 
[            We  are  out  so  far $6,202,190 
In  thirty  years  we  shall  have  paid  close 
>on  $180,000,000,  which  is  three  times  the 
amount  of  the  debt,  and  shall  then  be  losers 
to  the  amount  of  $120,000,000. 

It  would  have  been  enormously  cheap- 
er to  give  Mr.  Huntington  a  cancellation 
of  the  debt. 

Cheaper  in  freight  rates,  cheaper, 
therefore,  in  the  daily  living  expenses 
of  the  people. 

But  since  this  debt  and  the  annual 
charges  that  we  must  pay  on  it  are  directly 
and  solely  the  results  of  the  operations  (be- 
fore described)  of  Messrs.  Stanford,  Hunt- 
ington, Hopkins,  and  Crocker,  and  of  noth- 
ing else,  kindly  observe  the  impudence  of  the 
men  that  urge  us  to  forget  railroad  history. 

We  might  very  well  answer  that  we  will 
forget  railroad  history  when  the  railroads 
cease  to  make  us  pay  for  that  history. 

But  the  floating  of  the  gigantic  refund- 
ing scheme  had  another  result  besides  the 
levying  of  additional  tribute  upon  us.  Mr. 
Stanford  was  dead,  Mr.  Hopkins  was  dead, 
Mr.  Crocker  was  dead.  Mr.  Huntington, 
who  had  been  steering  and  directing  the 
new  operations,  died  (before  they  were  com- 
pleted) in  August,  1900. 

Some  confusion  followed  in  the  public 
mind,  with  many  stories  of  sales,  purchases, 
and  reorganizations.  When  this  mist  cleared 
away,  men  saw  that  the  Great  Millionaire 
Mill  had  passed  into  a  new  ownership. 

^ANDARD  OIL  AND   E.    H.   HARRIMAN   COME 
INTO    CONTROL 

For  years  the  many  properties  of  the 
'ginal  Big  Four  of  Sacramento  had 
.en  undergoing  consolidation.     For  all  the 


E.  H.  HARRIMAN,  WHO  ASSUMED  CONTROL  OF 
THE  SOUTHERN   PACIFIC  ON  HUNT- 
INGTON'S DEATH. 

millions  upon  millions  of  fictitious  stock 
issued  and  gathered  to  themselves  as  they 
had  gone  along,  for  all  the  fictitious  capi- 
talization in  all  the  long  list  of  subsidiary 
lines  and  branches,  being  company  within 
company  until  the  human  mind  wearied 
and  failed  to  follow  the  ramifications — for 
all  this  there  had  been  issued  stock  in  the 
Southern  Pacific  Company,  of  Kentucky, 
the  final  consolidated  concern. 

Great  blocks  of  this  were  now  acquired 
from  the  heirs  of  the  Big  Four  and  through 
the  exigencies  of  the  refunding  operations, 
and  when  the  mist  cleared  away  there  ap- 
peared as  the  real  owners  of  the  old  Central 
Pacific,  the  Southern  Pacific,  the  unknow- 
able convolutions  thereof,  the  Pacific  Mail, 
the  Morgan  steamships,  the  Union  Pacific, 
the  whole  bewildering  aggregation  with  all 
its  load  of  fictitious  capital,  buttressed  with 
lordly  gifts  from  the  public  domain,  rich 
with  spoils,  incomparably  the  grandest 
source  of  riches  ever  known  in  human  his- 
tory— of  the  whole,  incalculable  thing,  the 
real  owners  appeared  as  the  colossal  Stand- 
ard Oil  interests,  with  the  late  E.  H.  Har- 
riman  as  their  representative. 

In  the  end  it  was  the  Standard  Oil  group 
that  had  financed  the  "clever  and  ingen- 
ious" refunding  deal  and  had  thereby  seized 


368 


Hampton's  Magazine 


the  control  of  the  Mill,  and  it  is  to  the 
Standard  Oil  group  that  we  pay  our  $5,- 
900,000  of  annual  tribute  to  that  deal,  and 
all  the  other  tribute  on  all  the  other  deals 
back  to  the  days  of  the  Contract  and  Fi- 
nance Company,  John  Miller,  and  the  books 
at  the  bottom  of  the  river  Seine. 

Is  not  that  sweet? 

Yes,  we  should  love  to  forget  the  past  if 
the  past  would  only  let  us.  But  when,  on 
$200,000,000  of  fictitious  stock  created  by 
the  Contract  and  Finance  Company  and 
its  successors,  we  furnish  such  dividends 
that  the  price  of  that  stock  goes  up  to  137, 
the  manner  in  which  we  are  to  win  forget- 
fulness  of  the  past  ought  to  be  very  care- 
fully explained  to  us. 

So  much  for  the  business  side  of  forget- 
ting. Suppose  we  turn  now  to  the  political 
side  and  see  how  that  looks. 

We  found  that,  in  the  old  days,  this  com- 
pany was  wont  to  maintain  a  great  and 
elaborate  political  machine  covering  every 
corner  of  the  state  and  working  with  per- 
fect precision  to  fill  all  offices  with  persons 
chosen  by  the  company.  We  found  that 
this  machine  cost  much  money  and  the  cost 
thereof  was  and  is  assessed  upon  us,  who 
continue  year  after  year  to  pay. 

Always  to  pay. 

We  found  that  the  company  divided  the 
state  into  districts,  each  with  its  boss;  and 
the  districts  into  counties,  each  with  its 
boss;  and  that  the  county  bosses  reported 
to  the  district  bosses,  who  reported  to  the 
chief  boss,  who  was  the  company's  chief 
counsel  and  attorney  in  San  Francisco. 

Then  come  down  to  these  days  of  ours, 
if  you  will.  Who  is  Mr.  Walter  F.  Parker? 
He  is  the  Southern  Pacific  leader  for  the 
southern  district  of  California.  And  who 
report  to  him?  The  county  bosses  in  that 
district.  And  to  whom  does  Mr.  Parker 
report?  To  William  F.  Herrin,  chief  coun- 
sel of  the  Southern  Pacific  at  San  Francisco. 

Same  old  frame  work,  evidently. 

How  does  the  thing  work  to-day? 

Like  this: 

In  California  the  governor's  term  of 
office  is  four  years. 

A  new  governor  was  to  be  elected  in 
1906.  Mr.  James  N.  Gillett  was  then  a 
member  of  Congress  for  California.  Five 
months  before  the  election,  Mr.  E.  H.  Har- 
riman  gave  a  dinner  in  Washington  to  men 
influential  in  politics  and  business.  At  that 
dinner  Mr.  Gillett  was  chosen  to  be  the 


next  governor  of  California,  Mr.  Harriman 
announcing  in  a  few,  well-chosen  words  Gil- 
lett's  selection  by  the  railroad  company. 

To  ratify  this  choice,  the  State  Repub- 
lican Convention  was  called  at  Santa  Cruz. 
All  the  railroad  bosses  from  great  to  small 
had  received  the  necessary  word  about  Mr. 
Harriman 's  action,  and  proceeded  at  once 
to  secure  Gillett  delegations  from  the  coun- 
ties. In  Los  Angeles  County,  which  sent 
a  large  delegation,  Mr.  Walter  Parker  him- 
self directed  operations.  He  sat  on  an 
upper  floor  of  the  building  in  which  the 
county  convention  was  held,  and  a  staff 
of  messengers  ran  continually  between  his 
desk  and  his  leaders  on  the  floor.  Not  a 
move  was  made  without  his  word;  the  dele- 
gates were  marionettes;  he  sat  above  them 
and  pulled  the  strings. 

ABE  RUEF  RECEIVES  $I4,000  FOR  VOTES 

Likewise  in  San  Francisco,  which  had  a 
large  delegation,  Mr.  Herrin  took  personal 
charge  and  operated  with  no  less  success, 
although  upon  a  basis  more  primitive.  Ac- 
cording to  a  confession  of  Mr.  Abe  Ruef, 
the  convicted  boodler  of  San  Francisco, 
Mr.  Herrin  paid  him  $14,000  for  the  con- 
trol of  the  delegation. 

Simple,  neat,  effective. 

Of  late  years  California  has  been  growing 
more  and  more  restless  under  the  iron  sway 
of  the  Southern  Pacific.  Even  with  the 
active  cooperation  of  Mr.  Ruef,  former 
Mayor  Schmitz,  and  their  gang,  Mr.  Harri- 
man did  not  find  it  perfectly  easy  to  nomi- 
nate the  man  he  had  chosen.  Many 
persons,  including  some  long  inured  to  con- 
ditions, resented  that  Washington  banquet 
performance.  They  felt  that  it  marked  the 
limit  of  railroad  arrogance  on  one  side,  and 
of  the  state's  subjugation  on  the  other,  and 
they  did  not  like  it. 

Hence  the  Southern  Pacific  managers  at 
Santa  Cruz  were  put  to  rather  unusual 
methods  to  fulfill  Mr.  Harriman's  wishes. 

That  is  to  say,  they  auctioned  the  other 
offices  for  Gillett  support. 

In  this  way.  If  a  man  had  ambition  to 
be  a  judge,  and  they  knew  he  was  all  right 
and  sound  on  the  railroad's  supremacy, 
they  said  to  him: 

"How  many  votes  for  Gillett  can  you 
swing?" 

Perhaps  the  ambitious  one  replied  that 
he  could  swing  fifteen.  They  reported  this 
to  his  rival,  started  a  competitive  bidding, 


370 


Hampton's  Magazine 


and  the  man  that  undertook  to  dehver  the 
greatest  number  of  Gillett  votes  got  the 
place  on  the  ticket. 

Thus  do  we  vindicate  the  purity  of  our 
institutions  and  the  grandeur  of  represen- 
tative government. 

Mr.  Gillett  was  nominated.  I  have  here* 
a  little  picture  of  a  happy  family  group, 
being  in  fact  a  little  dinner  party  at  Santa 
Cruz  just  after  the  nomination.  These 
gentlemen  have  been  dining,  and  with 
pleasure  we  may  note  that  they  seem  to 
have  been  dining  well.  Gentlemen  of  a 
happy  aspect,  well  dressed,  contented,  and 
congenial,  no  doubt;  a  pleasant  occasion. 

SIGNIFICANT   GATHERING   BEFORE   GILLETT's 
NOMINATION 

That  handsome  gentleman  in  the  center 
with  his  hand  affectionately  on  the  shoulder 
of  the  gentleman  seated  before  him,  is  Mr. 
Gillett,  now  Governor  of  California,  and 
nominated  to  that  high  place  by  Mr.  Har- 
riman,  as  aforesaid.  The  gentleman  in 
front  of  him  upon  whom  he  leans  so  trust- 
ingly, is  Mr.  Abe  Ruef,  sometime  boss  and 
boodler  of  San  Francisco,  now  convicted  of 
the  dirtiest  of  political  crimes  and  out  on 
bail.  Yes,  that  is  Mr.  Ruef;  Mr.  Gillett's 
hand  is  on  Mr.  Ruef's  shoulder. 

At  Mr.  Gillett's  left  stands  Mr.  Walter 
F.  Parker,  to  whom  several  times,  and,  we 
must  fear,  rather  unpleasantly,  we  have 
alluded  in  these  chronicles.  Mr.  Parker  is 
a  gentleman  of  the  most  distinguished  con- 
sideration. When  Mr.  Frank  Flint,  at 
present  United  States  Senator  from  Cali- 
fornia, was  pubHcly  congratulated  upon  his 
election,  he  said,  with  touching  simplicity: 
"I  owe  it  all  to  Walter  Parker." 

Still  farther  to  Mr.  Gillett's  left  stands 
Judge  F.  H.  Kerrigan,  quite  at  ease,  with 
his  hands  in  his  pockets.  When  Judge 
Kerrigan  was  a  judge  of  the  Superior  Court, 
he  decided  the  crucial  Fresno  rate  case  in 
the  way  related  in  Hampton's  for  August. 
He  is  now  a  judge  of  the  Appellate  Court, 
having  found  promotion.  Judge  Bahrs,  who 
decided  the  case  the  other  way,  found  no 
promotion,  but  retired  to  private  life. 

Just  back  of  Judge  Kerrigan's  left  shoul- 
der is  Congressman  Knowland. 

Next  to  Mr.  Ruef  and  Mr.  Gillett  at 
their  right  is  Mr.  George  Hatton,  a  friend 
of  Mr.  Parker  and  of  the  Southern  Pacific. 
Next   to    him  is  Judge  McKinley,  and  at 

*  See  page  369. 


the  end  is  Judge  Henshaw,  of  the  Supreme 
Court. 

Thus  we  may  see  the  judiciary,  states- 
manship, commerce,  transportation,  black- 
mail and  boodle,  all  pleasantly  commingled 
and  meeting  on  equal  terms  under  the  genial 
auspices  of  the  Southern  Pacific  Railroad. 
Nothing  is  lacking  to  the  picture  except  in 
the  background  the  figure  of  Collis  Potter 
Huntington  in  an  attitude  of  benediction. 

Mr.  Gillett's  name  was,  in  the  cant  phrase, 
"submitted  to  the  voters"  of  California, 
who  nominally  elected  him  governor.  As 
a  matter  of  fact,  there  was  not  much  choice. 
The  railroad  company  played  the  usual 
tricks,  stimulated  the  partisan  frenzy,  be- 
fogged the  issue,  subsidized  editors,  flooded 
the  state  with  its  hired  newspapers,  made 
unthinking  people  believe  that  somehow 
the  security  of  the  country  depended  upon 
Gillett's  election,  created  the  impression 
that  by  voting  for  Gillett  a  man  was  "sup- 
porting the  President,  "did  some  other  things 
not  necessary  to  specify  here — and  won. 

Not  by  much  margin,  incidentally.  The 
number  of  people  it  can  fool  with  this  kind 
of  rot  is  steadily  diminishing. 

From  this  chapter  of  history  we  may 
learn  how  foolish  a  noise  we  make  when  we 
talk  about  any  new  basis  of  judgment  for 
one  railroad,  at  least.  This  railroad  is  do- 
ing in  politics  exactly  the  things  that  it  did 
forty-eight  years  ago  and  forty  years  ago 
and  twenty  years  ago  and  ten  years  ago 
and  all  times  between. 

Observant  persons  in  California  do  not 
need  to  be  told  this  any  more  than  they  need 
to  be  told  their  own  names.    They  know  it. 

But  elsewhere  has  grown  up  among  us  a 
strange  kind  of  sentimental  softness  in  re- 
gard to  railroad  rascality,  and  a  willingness 
to  accept  the  gold  bricks  of  repentance  and 
reform  whenever  they  are  offered  by  a  rail- 
road president  with  a  smug  face  and  an  in- 
durated conscience.  These  little  incidents 
may  show  how  much  credence  belongs  to 
such  protestations  when  you  hear  them 
urged  in  behalf  of  the  Southern  Pacific. 

In  California  every  fight  to  purify  condi- 
tions, to  reform  a  municipahty,  to  stop 
graft,  to  proceed  in  honesty  and  decency, 
is  a  fight  against  the  Southern  Pacific,  and 
that  is  as  true  of  the  heroic  struggles  of  Mr. 
Heney,  in  San  Francisco,  as  of  those  good- 
citizens  and  good  Americans  that  after 
years  of  strivhig  have  secured  a  memorable 
victory  for  righteousness  in  Los  Angeles. 


The  Railroad  Machine  as  It  Works  Now 


full,  and  to  my  sorrow  I  can  but  refer  to  it. 
Here  is  a  great  story  of  an  American  com- 
munity surely  working  its  way  from  sub- 
jugation to  freedom,  and  what  else  on  earth 
can  be  so  attractive  to  write  about? 

But  to  give  you  a  ghmpse  of  it:  In  Los 
Angeles  the  fight  centered  at  first  around 
the  control  of  the  harbor,  and  was  fought 
in  the  open,  without  disguise,  the  citizens 
on  one  side  and  the  Southern  Pacific  on 
the  other.  Later  came  on  a  long  struggle 
against  the  familiar  forces  of  municipal 
corruption,  in  which  the  Southern  Pacific 
fought  in  secret  on  the  side  of  evil.  It  owned 
the  street-railroad  system  and  was  interested 
in  other  pubHc-service  enterprises.  The 
street-railroad  system  was,  of  course,  against 
good  government.  It  is  against  good  gov- 
ernment everywhere  because  its  monstrous 
privileges  are  derived  from  bad  government. 
Naturally,  on  the  same  side  were  the  dives, 
the  bawdy  houses,  the  boodlers,  and  the 
Highest  Circles  of  Society.  They  always 
fight  together.  We  shall  come  later  to  this 
contest.     First  let  us  tell  about  the  harbor. 

Los  Angeles  lies  a  little  back  from  the 
coast.  Its  natural  harbor  is  San  Pedro, 
familiar  to  all  readers  of  Dana's  immortal 
"Two  Years."  San  Pedro  is  south  of  the 
city.  The  Southern  Pacific  owned  the  har- 
bor of  Santa  Monica,  fifteen  miles  north  of 
San  Pedro  and  from  the  city  lying  about  west. 

Neither  harbor  was  (as  it  lay)  in  any 
condition  to  accommodate  a  large  deep-sea 
traffic;  both  needed  breakwaters  and  other 
improvements.  Readers  of  Dana  will  re- 
call his  vivid  descriptions  of  the  perils  of 
his  San  Pedro,  the  roadstead  open  to  the 
terrible  southeasters,  the  sudden  rising  of 
the  gale,  and  the  swift  flight  of  the  vessel 
to  sea  until  the  storm  should  pass.  This 
had  not  much  changed  in  1871  when  Con- 
gress appropriated  money  to  improve  the 
harbor.  The  work  went  on  for  several 
years,  and  as  the  improvements  were  made 
the  commerce  of  the  port  increased.  Then 
Los  Angeles  entered  upon  its  period  of  rapid 
growth,  and  the  need  of  a  commodious  and 
safe  harbor  was  apparent. 

The  people  of  Los.  Angeles  wished  this  to 
be  at  San  Pedro.  At  first  the  railroad  com- 
pany seemed  not  to  care.  Then  its  officers 
bought  real  estate  at  Santa  Monica  *  and, 
in  1890,  Mr.  Huntington  declared  that  Los 

•  "The  Free  Harbor  Contest,"  by  Charles  Dwight  Willard, 
p.  80. 


371 


Angeles   must   have   its   harbor   at   Santa 
Monica,  or  not  at  all. 

There  began  now  a  contest  that  lasted 
eight  years.  Los  Angeles  appeared  regu- 
larly before  Congress  asking  for  an  appro- 
priation for  San  Pedro;  Mr.  Huntington, 
through  his  lobbyists  and  Congressmen,  as 
regularly  defeated  the  project.  All  that 
was  needed  at  San  Pedro  now  was  a  break- 
water that  could  be  built  at  no  great  ex- 
pense. Mr.  Huntington  invariably  knocked 
out  the  breakwater. 

HUNTINGTON  BECOMES  PROFANE  ABOUT  SAN 
PEDRO 

Meantime  army  engineers  had  examined 
both  harbors  and  reported  convincingly  in 
favor  of  San  Pedro  and  against  Santa  Mon- 
ica, Mr.  Huntington  was  stronger  than 
the  engineers.  In  the  face  of  their  report, 
he  had  a  bill  introduced  and  favorably  con- 
sidered to  appropriate  $3,000,000  for  his 
Santa  Monica  scheme.  He  could  not  quite 
get  this  passed,  but  he  could  always  defeat 
San  Pedro. 

In  1894  he  came  to  Los  Angeles,  strode 
into  the  rooms  of  the  Chamber  of  Com- 
merce, and  requested  a  conference.  Mem- 
bers were  summoned  by  telephone.  When 
they  arrived  he  told  them  they  were  mak- 
ing "a  big  mistake"  to  support  San  Pedro, 
that  it  was  not  to  his  advantage  to  have 
San  Pedro  selected,  and,  anyway,  they  could 
never  get  Congress  to  give  money  for  their 
scheme.  These  announcements  seemed  to 
make  little  impression  on  his  hearers.  Mr. 
Huntington  said: 

"Well,  I  don't  know  for  sure  that  I  can 
get  this  money  for  Santa  Monica;  I  think 
I  can.  But — "  bringing  down  his  fist  with 
an  explosive  slam,  "I  know  damned  well 
that  you  shall  never  get  a  cent  for  that  other 
place."  * 

The  voice  of  ultimate  government,  you 
see.  He  knew.  Not  less  interesting  than 
the  decree  of  this  ruler  is  the  fact  that  his 
listeners  agreed  not  to  let  it  be  known  to 
the  populace.  It  might  "increase  the  grow- 
ing bitterness."  When  you  are  fighting  for 
your  life  against  a  power  like  this,  there 
must  be  no  bitterness  on  your  side. 

The  issue  came  soon  after  before  the  Sen- 
ate Commerce  Committee.  Mr.  Hunting- 
ton was  there,  demanding  $4,000,000  for  his 
Santa  Monica.  The  Los  Angeles  people 
asked  for  a  small  sum  for  San  Pedro. 

*  "  The  Free  Harbor  Contest,"  p.  107. 


372 


Hampton's  Magazine 


The  St.  Louis  Globe-Democrat^ s  Washing- 
ton correspondence  of  those  days  contains 
this  paragraph: 

The  harbor  contest  at  Los  Angeles  waxes  warmer. 
C.  P.  Huntington  was  seen  going  the  rounds  of  the 
hotels  to-day  and,  although  it  was  Sunday,  he  made 
no  halt  in  buttonholing  senators.  Four  days  ago 
there  was  a  decided  majority  in  the  Commerce 
Committee  in  favor  of  following  the  wishes  of  the 
two  senators  from  California,*  but  since  the  arrival 
of  Mr.  Huntington  at  the  capital  it  is  now  a  matter 
of  great  doubt  where  the  majority  will  be  found. 
There  is  serious  speculation  in  the  minds  of  many 
people  as  to  the  means  Mr.  Huntington  may  have 
used  to  bring  about  this  change. 

Possibly  the  speculation  would  have 
gained  additional  zest  from  a  perusal  of  Mr. 
.Huntington's  letters  to  "Friend  Colton."  f 

Mr.  John  P.  Jones  was  a  member  of  the 
Senate  Commerce  Committee  and  an  ar- 
dent champion  of  Santa  Monica.  I  believe 
we  have  previously  encountered  the  name 
of  John  P.  Jones. J 

THE  DECISION  POSTPONED,  BINGER  HERMANN 
TAKES    IT    UP 

The  committee  voted  to  postpone  a  de- 
cision about  the  two  bills  until  it  could  go 
to  Los  Angeles  and  inspect  both  harbors. 
This  put  the  matter  over  for  two  years,  or 
until  1896. 

Meanwhile,  the  people  of  Los  Angeles  had 
formed  a  Free  Harbor  League  to  fight  for 
San  Pedro.  The  long  delay  wore  out  the 
enthusiasm.  In  i8g6  somebody  suggested 
that  probably  Mr.  Huntington  was  no  less 
tired  of  fighting.  A  friend  undertook  to 
sound  him  and  returned  with  the  statement 
that  Mr.  Huntington  willingly  agreed  to  a 
cessation  of  hostilities  for  the  rest  of  that 
session  of  Congress,  neither  side  to  make 
a  move. 

The  next  thing  the  people  of  Los  Angeles 
knew  Mr.  Binger  Hermann,  then  a  Repre- 
sentative from  Oregon,  and  a  member  of  the 
House  Commerce  Committee,  and  since 
with  other  claims  to  fame,  had  put  into  the 
River  and  Harbor  bill  two  items,  one  of 
$392,000  for  work  on  the  inner  harbor  of 
San  Pedro,  and  one  of  $3,098,000  to  com- 
plete Santa  Monica. 

*  One  of  these,  Stephen  M.  White,  a  Democrat,  was  a  Los 
Angeles  man  and   3  champion  of  San  Pedro. 

t  See  "The  Scientific  Corruption  of  Politics,"  Hampton's 
Magazine,  June.  1910. 

+  About  this  time  the  New  York  World  took  the  trouble  to 
find  out  who  owned  Santa  Monica.  It  discovered  that  the 
property  adjoining  the  exclusive  water  front  owned  by  the 
Southern  Pacific  was  divided  in  eight  holdings.  Of  this,  John 
P.  Jones  and  A.  B.  de  Baker  held  three.  All  the  rest  of  the  land 
was  in  the  name  of  Frank  H.  Davis,  representing  C.  P.  Hunt- 
ington. 


At  this  the  people  of  Los  Angeles  arose 
in  wrath,  and  in  the  clamor  of  their  protest 
the  committee  knocked  out  both  items. 

By  "the  people  of  Los  Angeles"  I  mean, 
and  have  meant,  the  majority.  As  soon 
as  the  railroad  company  announced  its 
choice  of  Santa  Monica,  there  had  sprung 
up  at  once  two  factions  in  the  city,  the  same 
factions  that  ever  since  have  continued  to 
struggle  for  its  possession.  On  one  side 
were  the  railroad's  attorneys,  friends,  and 
admirers,  and,  of  course,  the  wealthy  and 
respectable  element,  all  lined  up  with  Mr. 
Huntington  for  Santa  Monica.  On  the 
other,  the  masses  of  the  people,  the  labor 
unions,  merchants  without  social  aspira- 
tions, and  others  of  that  order,  fought  for 
San  Pedro. 

Santa  Monica  had  the  advantage  in  the 
influence  of  its  supporters;  San  Pedro  had 
the  numbers. 

Mass  meetings  were  held  by  each  side 
and  resolutions  passed,  the  San  Pedro  peo- 
ple meeting  out  of  doors  and  the  Santa 
Monicans  in  Illinois  Hall.  Both  parties 
circulated  petitions  to  Congress.  Presently, 
the  cause  of  Mr.  Huntington,  his  friends, 
lackeys,  and  social  peers,  was  deeply  hurt  by 
the  discovery  that  the  names  on  their  pe- 
tition were  largely  fraudulent.  Thereafter, 
San  Pedro  had  all  the  advantage. 

The  issue  came  April  i6,  1896,  before  the 
Senate  Committee  on  Commerce,  when 
delegations  representing  both  sides  were 
heard.*  Mr.  Huntington  had  a  majority 
of  the  Committee.  Nine  f  voted  to  re- 
store to  the  River  and  Harbor  bill  the  $3,- 
098,000  appropriation  for  Santa  Monica; 
six  opposed  it. 

When  the  bill  reached  the  Senate  floor, 
Senator  White  forced  through  an  amend- 
ment that  a  board  of  five  engineers  should 
determine  whether  the  $3,098,000  should 
be  expended  at  Santa  Monica  or  at  San 
Pedro.  In  conference,  Mr.  Binger  Her- 
mann bitterly  fought  this  provision,  which 
was  hung  up  for  many  days,  but  Congress- 
man James  G.  Maguire,  of  San  Francisco, 
threatened  that  unless  the  item  were  al- 
lowed to  stand,  he  would  expose  on  the  floor 
of  the  House  the  whole  Huntington  game, 
and  the  thing  went  through, 

*  Among  the  champions  of  Santa  Monica  on  this  occasion 
was  former  Senator  Cornelius  Cole,  whose  name  we  encoun- 
tered in  the  Colton  letters. 

t  Frye,  of  Maine;  Gorman,  of  Maryland;  Elkins,  of  West  \'ir- 
ginia;  Jones,  of  Nevada;  Quay,  of  Pennsylvania;  Murphy,  of  New 
York;  McMillan,  of  Michigan;  McBride,  of  Oregon;  Squire,  of 
Washington. 


TLe  Railroad  Machine  as  It  Works  Now 


373 


Great  rejoicing  in  Los  Angeles. 
The  board  of  five  engineers  decided  in 
favor  of  San  Pedro. 

More  rejoicing  in  Los  Angeles. 

But  here  came  strange  developments. 


I 


ALGER  IGNORES  THE  SENATE  AND  THE 
ATTORNEY-GENERAL 


The  matter  now  rested  in  the  hands  of 
General  Russell  A.  Alger,  Secretary  of 
War. 

General  Alger  was  an  old  friend  and  busi- 
ness associate  of  Mr.  Huntington,  who  had 
given  heavily  to  the  Re- 
publican   campaign 
fund. 

General  Alger's  first 
achievement  was  to  hold 
up  the  appropriation 
nine  months,  so  that 
the  Board  of  Engineers 
could  not  begin  its  work. 

The  Board's  report 
was  made  in  March, 
1897,  and  work  should 
have  been  begun  four 
months  later.  Month 
after  month  went  by, 
but  the  War  Depart- 
ment did  nothiiig  about 
San  Pedro.  Los  Ange- 
les people  bitterly  com- 
plained. They  repeat- 
edly called  General 
Alger's  attention  to  the 
delay,  and  had  in  return 
bland,  empty  promises 
of  immediate  action. 
They  began  to  under- 
stand that  the  real  in- 
tention was  to  stop  the 
work  until  the  matter 
could  be  thrown  back  into  Congress,  and 
Santa  Monica  be  substituted. 

Former  Congressman  McLachlan,  of  Los 
Angeles,  protested  once  more  to  Alger,  and 
received  the  startling  information  that  the 
Board's  report  was  defective  and  must  be 
carefully  studied  before  action  could  be 
taken. 

Another  month  went  by  with  no  sign  of 
action.  Mr.  McLachlan  again  called  Gen- 
eral Alger's  attention  to  the  delay.  This 
time  General  Alger  lost  his  temper,  declined 
to  answer  any  questions,  and  declared  that 
he  would  advertise  for  bids  when  he  got 
ready. 


JAMES  N.  GILLETT,  GOVERNOR  OF  CALI- 
FORNIA. 


Senator  White  now  introduced  a  resolu- 
tion, calling  upon  the  Secretary  of  War  for 
information  about  the  delayed  work  at  San 
Pedro.  General  Alger  furnished  in  reply 
several  reasons,  all  denounced  as  flimsy  or 
baseless,  and  the  Senate  responded  in  a  curt 
resolution  directing  the  Secretary  of  War  to 
begin  work  at  once. 

This  resolution  the  Secretary  of  War 
calmly  ignored. 

Los  Angeles  people,  after  a  time,  called 
his  attention  to  it. 

He  remarked  blithely  that  it  meant  noth- 
ing to  him  because  it 
had  not  been  passed  by 
the  House. 

Then  some  kind 
friends  took  him  aside 
and  told  him  that  if  he 
persisted  in  that  view, 
the  Senate,  when  it  re- 
assembled, would  at- 
tend to  his  case  in  a 
way  that  would  sur- 
prise him.  General  Al- 
ger intimated  that  he 
did  not  care. 

By  this  time  people 
in  Los  Angeles  were 
deeply  stirred.  They 
united  in  a  petition  to 
President  McKinley,  re- 
citing the  facts.  He  re- 
ferred it  to  Attorney- 
General  McKenna.  Mr. 
McKenna  rendered  an 
opinion  that  there  was 
no  legal  reason  why 
work  should  not  begin 
at  once  at  San  Pedro. 
General  Alger  let  the 
opinion  lie  a  month 
on  his  desk  without  deigning  to  notice  it. 
The  Free  Harbor  League  and  the  people 
of  all  Southern  California,  seeing  how  Mr. 
Huntington  had  outwitted  them,  and  that 
he  had  every  prospect  of  defeating  them  at 
last,  began  a  desperate  campaign  against 
Alger,  trying  chiefly  to  induce  the  President 
to  force  his  Secretary  of  War  to  act  or  to 
force  him  out. 

After  three  months  of  this  Alger  was 
driven  to  the  point  of  saying  that  he  could 
not  begin  the  work  because  there  was  no 
direct  appropriation,  and  he  must  wait  until 
Congress  should  vote  again. 
The  people  pointed  out  that  even  if  this 


374 


Hampton's  Magazine 


were  true,  he  could  advertise  for  bids  and 
make  a  start. 

General  Alger  said  he  had  no  money  to 
advertise  with. 

All  the  Los  Angeles  and  San  Francisco 
papers  telegraphed  offers  to  print  the  ad- 
vertisements for  nothing,  and  the  Los 
Angeles  Chamber  of  Commerce  guaranteed 
that  it  would  pay  all  advertising  bills. 

General  Alger  said  this  would  not  be 
dignified  and  got  up  some  question  that  he 
said  must  be  referred  to  the  Judge- Advocate 
General. 

The  Judge-Advocate  General  promptly 
decided  that  the  question  was  without  sub- 
stance and  that,  anyway,  there  was  $50,- 
000  available  for  advertising. 

Meantime  Mr.  McKenna  had  ceased  to 
be  Attorney-General,  being  succeeded  by 
Mr.  Griggs.  General  Alger  now  referred  to 
Mr.  Griggs  the  identical  question  that  pre- 
viously had  been  referred  to  and  decided 
by  Mr.  McKenna. 

At  this  the  whole  State  of  California  broke 
into  fierce  and  bitter  complaint.  It  was 
directed  at  President  McKinley,  and  at  last 
it  evoked  from  him  a  positive  order  that  the 
Secretary  of  War  should  begin  work. 

He  had  wasted  two  years  and  one  month. 

The  contract  was  now  let,  the  breakwater 
constructed,  and  the  harbor  completed. 

Its  true  value  to  Los  Angeles  is  not  yet 
obtainable,  because  the  Southern  Pacific 
barricades  it  with  some  of  the  most  extortion- 
ate rates  known  on  this  or  any  other  conti- 
nent. But  the  inevitable  result  of  the  rail- 
road company's  policy  will  be  a  municipal 
railroad  to  the  harbor  and  the  beginning  of 
Los  Angeles  as  a  great  seaport. 
'  Such  are  the  latter-day  operations  of  the 
Southern  Pacific  in  national  affairs.  And 
here  is  a  sample  of  its  record  in  regard  to 
municipalities. 

JAMMING   A    SOUTHERN-PACIFIC    ORDINANCE 
THROUGH    THE    CITY   COUNCIL 

By  1905  most  of  the  valuable  franchises 
in  Los  Angeles  had  been  seized  by  the  allied 
interests  of  which  the  Southern  Pacific  was 
the  chief  and  commander.  One  was  left 
being  the  chance  to  build  a  railroad  along 
the  river  bank  in  the  city  limits. 

On  March  26,  1906,  the  mayor  was  out 
of  town,  and  one  Summerland,  president 
of  the  City  Council,  was  acting  mayor.  The 
Council  was  in  regular  weekly  session.  At 
4.30  P.M.,  when  all   routine  business  had 


been  disposed  of  and  most  of  the  spectator; 
had  departed,  an  ordinance  was  introduced 
granting  to  one  E.  W.  Gilmore  "and  hia 
assigns,"  a  franchise  for  a  railroad  on  the 
west  bank  of  the  river  from  the  south  city 
limits  to  Aleso  Street,  a  distance  of  about 
three  miles. 

This  was  put  on  passage  at  once.  Mr. 
Charles  D.  Willard,  representing  the  Mu- 
nicipal League,  perceived  what  was  on  foot 
and  vehemently  protested.  He  went  upon 
the  floor  of  the  Council  and  appealed  to  an 
honest  alderman  to  vote  against  the  grab. 
A  representative  of  the  city  attorney's 
office  joined  him  in  strenuous  objection. 
Nevertheless,  the  ordinance  was  jammed 
through. 

Outside  waited  a  carriage  to  take  a  mes- 
senger with  the  ordinance  to  Summerland 's 
house,  where  he  was  prepared  to  sign  it 
But  first  the  signature  of  the  city  clerk  was 
necessary.  An  underling  dashed  down- 
stairs to  the  city  clerk's  oflice,  put  the 
ordinance  under  City  Clerk  Lelande's  nose, 
and  asked  him  to  sign  it,  giving  the  impres- 
sion that  it  was  merely  routine  legislation. 

Lelande  demurred,  looked  over  the  docu- 
ment, and  refused  to  sign.  Without  his 
signature  Summerland  could  do  nothing, 
and  the  ordinance  was  hung  up. 

The  next  day  the  discovery  was  made 
that  because  of  a  technical  irregularity  in 
the  passing  of  the  ordinance,  it  must  needs 
be  passed  again,  and  a  special  meeting  of 
the  Council  was  called  for  the  next  day, 
Wednesday,  March  28th,  when  the  iniquity 
went  through  by  a  vote  of  6  to  i. 

CITY  CLERK   LELANDE 'S   ASTOUNDING 
AFFIDAVIT 

What  happened  next  will  be  found  re- 
lated in  the  following  affidavit,  which  cov- 
ers the  whole  story: 

State  of  California,  | 

County  of  Los  Angeles.   )  ^^" 

H.  J.  Lelande,  being  duly  sworn,  deposes  and 
says: 

The  facts  in  relation  to  the  attempted  passage 
of  what  was  become  generally  known  as  the  Gil- 
more  riv^er  bed  franchise  are  as  follows: 

Late  in  the  afternoon,  about  6.30  p.m..  of  the  date 
when  this  franchise  was  first  presented  to  the  Coun- 
cil, Mr.  Wilde,  my  chief  deputy,  came  into  my  pri- 
vate office  and  placed  this  franchise  on  my  desk 
before  me,  stating  that  "  the  boj's  upstairs  were  fn 
a  hurry  fo  this,"  and  asked  me  to  sign  it.  This 
franchise  consisted  of  several  typewritten  pages. 
Mr.  Wilde  turned  it  over  to  the  last  page,  which 
contained  the  space  for  the  signature  of  the  mayor 
and  myself,  and  asked  me  to  sign  it,  as  "  the  boys 


I 


The  Railroad  Machine  as  It  Works  Now 


375 


were  upstairs  waiting  for  it,"  and  I  asked  what  it 
was.  Mr.  Wilde  replied,  "A  franchise  for  a  spur 
track."  I  told  Mr.  Wilde  that  I  would  sign  it  in  a 
few  minutes  as  I  was  busily  engaged  writing  a  letter. 

Mr.  Wilde  left  my  private  office,  and  shortly  after 
his  departure  W.  R.  Hervey  came  into  my  private 
office  and  asked  if  I  had  signed  the  ordinance  that 
Mr.  Wilde  brought  in,  and  I  stated  that  I  had  not; 
and  he  said  that  Mr.  Gilmore  was  going  away  that 
evening  and  would  like  to  have  me  sign  it  at  once, 
as  they  wished  to  have  it  published  in  the  morning. 
After  Mr.  Hervey  had  made  this  statement  I  looked 
at  the  document  for  the  first  time,  and  then  informed 
Mr.  Hervey  that  I  would  wait  and  allow  this  to  go 
through  in  the  usual  manner  as  I  did  not  see  any 
necessity  for  haste,  or  words  to  that  efifect.  Mr. 
Hervey  urged  me  as  a  personal  favor  to  him  and  to 
Mr.  Gilmore  to  sign  it  at  once,  and  I  again  informed 
him  that  I  saw  no  necessity  to  hurry  this  matter, 
and  he  stated  that  he  would  see  that  I  signed  it  and 
left  the  office,  apparently  angry. 

Very  shortly  after  Mr.  Hervey  left  the  office,  Mr. 
Gilmore  came  in  and  said  that  he  was  going  to  leave 
town  that  night  and  wanted  to  get  this  fixed  up 
and  pubHshed  in  the  morning,  and  pleaded  with  me 
to  sign  it  at  once.  I  made  the  same  reply  to  Mr. 
Gilmore  that  I  made  to  Mr.  Hervej-,  that  "  I  would 
allow  the  ordinance  to  take  its  usual  course."  After 
I  had  made  this  statement,  Mr.  Gilmore  continued 
to  plead  with  me  to  sign  the  ordinance,  which  I  re- 
fused to  do. 

Just  before  I  started  for  home  I  was  called  up  on 
the  telephone  and  informed  that  Mr.  Summerland 
was  waiting  upstairs  for  me  to  bring  that  ordinance. 
I  answered  "All  right,"  but  had  no  intention  of 
bringing  it  up.  I  took  my  hat  and  left  for  home. 
And  shortly  after  I  had  finished  my  dinner,  Mr.  Gil- 
more called  at  my  residence  and  again  pleaded  with 
me  to  sign  the  ordinance  that  night,  and  again  said 
that  this  was  a  matter  of  great  importance  to  him 
and  he  was  desirous  of  having  the  matter  completed 
before  he  left  the  city,  and  ofiFered  me  his  political 
influence  if  I  would  sign  it.  He  made  the  state- 
ment that  I  would  never  regret  signing  it. 

Then,  shortly  after  the  departure  of  Mr.  Gilmore 
from  my  residence,  I  came  back  to  the  office  and 
Mr.  W.  F.  Parker  called  me  up  by  'phone  that  night 
and  wanted  to  know  if  I  was  going  to  be  at  my 
office  for  a  few  minutes.  I  stated  that  I  was,  and 
he  said  he  was  coming  over.  Shortly  after  receiv- 
ing the  message,  Mr.  Parker  came  to  my  office  and 
asked  to  see  the  ordinance,  which  I  allowed  him 
to  do,  and  he  made  the  statement  that  he  didn't 
know  whom  it  was  for,  and  that  he  was  glad  I 
hadn't  signed  it,  and  asked  me  not  to  sign  it  imtil 
he  had  found  out  more  about  it.  I  told  him  that 
I  had  not  intended  to  sign  it  until  the  following 
day,  anyway. 

The  minute  clerk  had  prepared  his  minutes,  show- 
ing that  the  council  had  adopted  the  ordinance  by 
a  vote  of  six  to  one,  Summerland  being  acting  mayor 
in  McAleer's  absence,  and  Mr.  Smith  being  absent. 
My  attention  was  called  to  the  fact  that  Council- 
naan  Houghton  first  voted  "  No  "  and  finally  changed 
his  vote  to  "  Yes,"  other  business  having  been  trans- 
acted in  the  interim,  and  at  the  time  that  Council- 
man Houghton  changed  his  vote  to  "  Yes"  the  chair- 
man then  announced  that  the  ordinance  had  been 
adopted;  so  when  the  members  of  the  Council  found 
that  we  had,  on  Tuesday,  recorded  the  ordinance 
as  having  been  lost  they  met  again  on  the  next  day, 


Wednesday,  and  passed  the  ordinance  by  a  vote  of 
six  to  one.  I  will  furnish  an  exact  copy  of  the 
minutes  showing  the  above  statement  to  be  correct. 

About  three  o'clock  on  Wednesday,  the  day  the 
ordinance  was  passed,  Mr.  Parker  called  me  up  by 
'phone  and  asked  me  if  I  would  step  down  to  his 
office.  I  informed  him  that  I  was  quite  busy  and 
would  prefer  having  him  come  to  my  office  in  the 
city  clerk's  office.  He  said  he  thought  it  was  best 
for  him  not  to  come  there,  but  would  meet  me 
at  the  Hotel  Alexandria  buffet.  I  replied  that  I 
would  meet  him  there  after  five  o'clock.  I  left 
the  office  about  five  o'clock  and  went  to  the  Alex- 
andria buffet  and  there  met  Mr.  Parker  in  one  of 
the  little  cushion  places  there.  He  opened  the  con- 
versation and  said,  "I  suppose  you  know  what  I 
want  to  see  you  about?"  I  answered  that  "I  be- 
lieve I  do,"  or  words  to  that  effect. 

One  of  the  first  questions  asked  me  by  Parker 

was    "How  MUCH    WILL  YOU    TAKE    TO    SIGN    THAT 

ORDINANCE  RIGHT  AWAY?  "  or  words  to  that  cffcct. 
I  remember  this  distinctly  because  I  was  surprised 
that  he  would  make  such  a  statement.  After  which 
he  said,  "I  can  get  you  a  thousand  dollars  if 

YOU  SIGN  that  ordinance  TO-DAY  AND  TAKE  IT  TO 
SUMMERLAND." 

My  answer  was  that  "I  did  not  want  any  of  that 
kind  of  money." 

He  also  made  the  statement  that  money  was 

BEING   SPENT  AND   I  IHGHT  AS   WELL  GET  SOME   OF 

IT.  He  said  that  my  p>ower  was  not  executive,  that 
my  duty  was  simply  ministerial,  and  that  I  might 
as  well  get  the  money  and  sign  it  and  get  it  out  of 
my  hands  as  quickly  as  possible.  I  said  that  I  was 
going  to  hold  it  until  Mayor  McAleer  came  back. 
He  said  that  it  didn't  make  any  difference  to  him, 
that  I  was  overlooking  a  chance  to  get  some  of  the 
money,  or  words  to  that  effect;  whereupon  I  re- 
turned to  the  office. 

At  the  time  Parker  and  I  had  the  conversation 
in  the  Alexandria  buffet  he  told  me  that  he  had 
found  out  that  this  was  for  Mr.  Huntington.  He 
made  this  last  statement  as  to  his  having  found  out 
that  it  was  for  the  Huntington  interests  in  connec- 
tion with  his  statement  that  money  was  being  used. 
Various  other  people  called  me  up,  some  before  this 
conversation  with  Mr.  Parker,  and  some  after,  but 
no  officials,  and  urged  me  to  sign  it  and  get  it  out 
of  my  hands  quick,  or  words  to  that  effect. 

I  went  back  to  my  office  and  stayed  there  until 
about  6.30  o'clock.  In  the  mean  time  I  had  several 
calls,  and  I  went  home  and  stayed  at  home  until 
about  8.15  o'clock,  when  I  left  home  to  keep  from 
being  further  disturbed.  Wednesday,  about  four 
o'clock,  Charley  McKeag  was  the  man  that  sent  a 
telegram  at  my  request  to  McAleer,  who  was  then 
out  of  the  city,  to  return  as  quickly  as  possible. 
I  kept  the  ordinance  in  my  safe  until  Mayor 
McAleer  returned. 

After  McAleer's  return,  then,  to  get  it  to  the 
mayor,  I,  of  course,  certified  it,  so  that  he  might 
sign  it  or  veto  it.  No  previous  legal  notice  of  any 
kind  was  given  to  the  public  of  the  intention  to 
pass  this  ordinance,  and  no  competitive  bids  were 
asked  for. 

(Seal)  (Signed)  H.  J.  Lelande. 

Subscribed  and  sworn  to  before  me  this  2  2d  day 
of  November,  1909. 

(Signed)  Geo.  S.  Welch, 
Notary  Public  in  and  for  the  County  of  Los  Ange- 
les, State  of  California. 


376 


Hampton's  Magazine 


On  his  return,  Mayor  McAIeer  vetoed  the 
ordinance  in  a  message  so  virulent  that  one 
of  the  aldermen  moved  that  the  "insult  be 
returned  with  the  rest  of  it,  unread." 

The  intention  was  to  pass  the  ordinance 
over  his  veto,  but  the  people  of  Los  Ange- 
les, whose  wrath  had  been  rising  from  the 
first  news  of  the  steal,  were  now  in  a  state 
of  dangerous  excitement.  Among  the^ost 
orderly  and  laAt-abiding  of  people,  they  had 
been  wrought  out  of  their  usual  self-com- 
mand by  the  audacity  of  the  franchise 
grabbers,  and  if  the  councilmen  had  per- 
sisted in  defying  public  opinion,  some  re- 
markable scenes  might  have  followed.  But 
the  aldermen  took  fright  and  abandoned  the 
ordinance. 

Such  is  the  modern  method  of  the  South- 
ern Pacific  in  politics. 

And  here  is  its  modern  method  in  busi- 
ness. 

The  great  steamers  Mongolia  and  Man- 
churia, of  the  Pacific  Mail,  in  every  way 
magnificent  specimens  of  marine  architec- 
ture, were  built  at  Newport  News  for  the 
Atlantic  Transport  Line,  under  the  belief 
that  Congress  would  pass  the  ship  subsidy. 

When  this  hope  failed,  the  two  steamers 
were  sold  to  the  Oregon  Short  Line,  a  pos- 
session of  the  Southern  Pacific  Railroad 
system. 

That  is  to  say,  they  were  bought  with  the 
money  of  the  Oregon  Short  Line.  In  point 
of  fact  (according  to  the  sworn  testimony 
of  a  high  ofiicer  of  the  company) ,  their  pur- 
chase stood  in  the  name  of  Mr.  E.  H.  Harri- 
man,  by  whom  they  were  leased  to  the 
Pacific  Mail,  and  who  collected  from  the 
Pacific  Mail  their  rental,  which  was  $30,000 
a  month  for  each  steamer. 

In  other  words,  Mr.  Harriman,  repre- 
senting the  Standard  Oil  Company,  con- 
trolled the  Oregon  Short  Line  and  also 
controlled  the  Pacific  Mail.  He  used  his 
control  of  the  Oregon  Short  Line  to  buy  the 
steamers  with  the  Oregon  Short  Line's 
money  (in  his  name),  and  then  used  his 
control  of  the  Pacific  Mail  to  lease  the 
property  thus  secured  for  his  own  bene- 
fit.* 


That  is  the  way  the  thing  is  done  now 
For  all  of  it  at  all  times  we  must  pay. 
To  what  extent  we  have  already  paid' 
may  be  gathered  from  a  table  with  which 
we  may  well  conclude  our  reflections  on  this 
edifying  subject.  It  does  not  show  the 
total  production  of  the  Great  Millionaire - 
Mill;  probably  no  human  mind  could  trace,! 
formulate,  and  accurately  state  what  that 
production  has  been.  It  shows  only  a  part 
of  the  wealth  that,  without  return  of  any 
kind,  we  have  freely  bestowed  upon  this 
unparalleled  institution: 

Central  Pacific — 

Government  land  grant,  mini- 
mum       $30,000,000 

Unearned  dividends  on  stock...       34,000,000 

Capitalized   interest  on  subsidy 

bonds 30.700,000 

Common  stock  (representing  no 

investment) 67,275,500 

Bonus  on  bonds i6,8i^,coo 


$178,794,500 
Southern  P.\cific — 

Government  land  grant,  mini- 
mum      $40,000,000 

Donations  by  California  councils         1,002,000 

Mission  Bay,  donated  by  the 
state,  estimated  value  at  the 
time 9,500,000 

Capital    stock    (representing    no 

investment) 160,000,000 

Dividends  thereon 30.400,000 

$240,902,000 
Southern  Pacific  Company  of  Ken- 
tucky— 
Government  land  grant  acquired 

with  Morgan  purchase $13,000,000 

Surplus    capitalized    (see    report 

1903) 100,081,022 

Stock  acquired  under  early  leases       76,000,000 


$189,081,022 


*  See  "  In  the  Matter  of  the  Consolidation  and  Combination  of 
Carriers.  Relations  between  Such  Carriers  and  Community  of 
Interest  therein,"  etc.     Before  the  Interstate  Commerce  Com- 


Grand  Total $608,777,522 

Of  this  colossal  sum  only  an  inconsider- 
able fraction  can  be  held  to  represent  any 
kind  of  investment,  and  the  greater  part  is 
to  this  day  drawing  interest  and  dividends 
from  the  consuming  public. 

Reflected  in  the  cost  of  living. 

mission,  at  San  Francisco,  January  29,  30,  and  31,  1907.  This 
whole  edifying  story  of  the  Harriman  performance  is  described 
in  the  testimony  of  R.  P.  Schwerin  at  pp.  113,  iis.  is6. 158, etc. 
At  the  New  York  hearing  there  were  introduced  the  minutes  of 
the  meeting  of  the  Oregon  Short  Line's  Executive  Committee  of 
March  26,  1903,  at  which  this  deal  was  ratified. 


The  Paying  of  the  Bill 

By  Charles  Edward  Russell 

Author  of ''The  Heart  of  the  Railroad  Problem,''  "Beating  Men  to  Make  Them  Good,"  etc. 

Portraits  by  S.  G.  Cahan 

Editorial  Note. — A  few  weeks  ago  the  antirailroad  candidate  for  Governor  of  Cali- 
fornia, Hiram  Johnson,  was  nominated  in  the  primaries  of  the  state  by  an  overwhelming  majority. 
What  part  Mr.  Russell's  articles  have  played  may  be  judged  by  the  following  telegram  from  the 
editor  of  the  San  Francisco  Bulletin :  "  Russell's  articles  in  your  inagazine  served  a  great  purpose 
and  helped  immensely  to  dethrone  railroad  domination  of  California.  Revolution  wins  Governor, 
two  Congressmen,  probably  United  States  Senator,  and  Legislature.  We  owe  a  great  deal  to 
you.     Fremont  Older." 


As  to  the  specific  cause  of  the  increased  cost  of 
living,  President  Taft  to-day  frankly  told  various 
of  his  callers  that  he  was  unable  to  account  for  it. — 
News  dispatch  from  Washington,  December  30,  loog. 

They  increased  the  cost  of  living.  .  .  .  They 
charged  all  that  the  traffic  would  bear,  and  appro- 
priated a  share  of  the  profits  of  every  industry  by 
charging  the  greater  part  of  the  difference  between 
the  actual  cost  of  production  and  the  price  of  the 
article  in  the  market. — Pacific  Railroad  Commission 
Report,  p.  141- 

AND  now  for  us,  the  people,  who  pay 
for  all  this  gigantic  fortune  building, 
for  fraudulent  contract  and  political  ma- 
chine, watered  stock  and  dishonest  lease; 
who  paid  for  all  yesterday  and  pay  for  it 
to-day  and  will  pay  for  it  to-morrow,  many 
times  over. 

Where  do  we  come  in? 

In  1887,  Governor  Pattison,  at  the  close  of 
the  long,  patient,  judicial  inquiry  by  the 
Pacific  Railroad  Commission  of  which  he 
was  chairman,  delivered  his  opinion  that 
the  inflated  part  of  the  Central  Pacific's 
capital  amounted  to  a  tax  of  $3,000,000  a 
year  *  upon  the  shippers  of  the  country. 

We  have  seen  the  means  by  which  the 
inflation  was  achieved,  the  multifold  tricks, 
swindles,  and  fraudulent  devices.  This  is 
what  such  things  cost  us  in  1887 — above 
any  fair  compensation  for  any  service  per- 
formed. 

In  the  eighteen  years  from  the  completing 
of  the  Central  Pacific  to  the  Commission's 
report  in  1887,  the  four  men  of  Sacramento 

*  Pacific  Railroad  Commission,  Minority  Report,  p.  146. 


had  taken  from  ti^e  shippers  of  the  country 
on  this  account  alone  $54,000,000 — through 
the  forms  of  illegitimate  toll  referred  to  by 
Governor  Pattison,  and  above  any  fair  com- 
pensation for  any  service  performed. 

In  this  total,  the  work  of  the  Contract  and 
Finance  Company  as  a  producer  of  fictitious 
capital  has  some  place.  But  we  are  to  re- 
member that,  aside  from  this  and  from  all 
other  sources  of  sudden  wealth  in  Governor 
Pattison's  calculations,  there  was  ever  the 
staggering  accretion  of  a  thousand  other 
operations  and  a  thousand  extravagances 
and  excesses  of  power.  To  the  one  item  of  in- 
terest-bearing capital  that  Governor  Patti- 
son had  in  mind  we  must  add  many  indus- 
trious efforts  under  the  names  of  the 
Western  Development  Company,  the  Pacific 
Improvement  Company,  the  coal  and  iron 
companies,  the  bridge  companies,  street  rail- 
road companies,  and  countless  other:  aliases 
and  masks  behind  which  these  men  rode  the 
highways.  All  these  left  behind  their  pro- 
portionate share  of  burden  on  the  public. 

So  did  the  interwoven  leases,  the  money 
paid  to  prevent  disclosure,  the  money  spent 
to  defeat  Mrs.  Colton,  the  money  spent  in 
dealing  with  the  settlers  of  Mussel  Slough, 
the  money  spent  to  bribe  legislatures  and 
to  subsidize  editors,  the  money  spent  to 
maintain  the  vast  political  machine  in 
California,  and  the  money  spent  to  defend 
the  illegal  land  grants. 

All  this  stupendous  sum  was  piled  up, 
aside  from  Governor  Pattison's  total.  Every 


507 


508 


Hampton's  Magazine 


year  the  interest  on  it  was  being  paid  by  the 
shippers,  and  Governor  Pattison  estimated 
that  the  small  part  of  this  tribute  due  to  the 
brigandage  of  the  old  Central  Pacific  and 
the  Contract  and  Finance  Company  was 
$3,000,000  a  year — paid  by  the  shippers. 

The  shippers,  of  course,  merely  passed  it 
along,  with  interest,  to  the  consumers.  You 
and  me. 

So  there  is  where  we  came  in  twenty-three 
years  ago:  to  the  tune  of  $3,000,000  a  year 
cast  into  only  a  part  of  the  Millionaire  Mill. 

Even  then,  and  even  for  that  small  part, 
the  tribute  was  beyond  any  justification  and 
wholly  arbitrary. 

If  the  railroad  had  been  built  with  a  fair 
degree  of  honesty  and  had  been  so  managed, 
or  if  it  had  represented  only  legitimate  in- 
vestment, it  could  have  paid  from  the  begin- 
ning 6  per  cent,  interest,  discharged  all  its 
obligations  to  the  government,  and  saved  in 
eighteen  years  $54,000,000  to  shippers  over 
the  Central  Pacific  alone. 

At  the  same  time,  the  Four  of  Sacramento 
would  have  owned  2,495  miles  of  railroad 
absolutely  free  from  debt  and  every  cent  of 
their  investment  would  have  been  repaid  to 
them. 

WHAT    A   RAILROAD    TAX    OF   $3,000,000 
MEANS    TO    YOU    AND   ME 

This  is  not  a  surmise  but  a  simple  mathe- 
matical demonstration.  If  the  enterprise 
had  been  fairly  honest,  the  stockholders 
would  have  realized  by  1887  for  every  dollar 
of  their  stock  $1.07  in  dividends,  $1.11  from 
the  land  sales,  and  would  have  had  $4  worth 
of  interest  in  the  property;  so  that  in 
eighteen  years  each  dollar  would  have 
yielded  $6.18 — by  the  methods  of  approxi- 
mate honesty. 

To  the  householders  of  America  there 
would  have  been  saved  $54,000,000  of  dis- 
honest tolls  plus  interest  and  profits  thereon. 

Those  $54,000,000  were  the  exact  measure 
of  the  difference  to  us  between  honest  and 
dishonest  methods.  The  profit  of  dis- 
honest methods  for  eighteen  years  was 
$54,000,000;  on  the  Central  Pacific  alone. 

Twenty-three  years  have  passed  since 
Governor  Pattison  reached  this  conclusion. 

If  the  trafiic  had  remained  as  it  was  in 
1887,  and  there  had  been  no  other  tribute 
exactions,  we  should  have  paid  so  far  $120,- 
000,000  in  excessive  charges  because  of 
crooked  accounts  and  fraudulent  contracts; 
on  the  Central  Pacific  alone. 


The  traffic  has  greatly  increased;  the 
operations  have  been  repeated,  extended, 
improved,  and  multiplied;  more  watered 
stocks  and  baseless  bonds  have  been  prodi- 
gally heaped  upon  the  property,  with  more 
corruption,  more  bills  for  purchased  legisla- 
tion, more  expenses  of  the  California  politi- 
cal machine,  more  payments  to  Abe  Ruef 
and  his  kind,  more  expenses  incurred  by  the 
W.  F.  Herrins  and  their  staffs  of  poli- 
ticians, more  deals,  more  dishonest  leases, 
more  hired  editors,  more  crooked  bosses. 

For  all  these  we  are  paying  year  after 
year,  just  as  we  pay  for  the  original  Con- 
tract and  Finance  Company  crookedness. 

So  that  if  Governor  Pattison  could  come 
back  now  and  repeat  his  inquiry,  he  would 
find  the  annual  charge  that  in  1887  was 
$3,000,000  for  the  Central  Pacific  alone  is 
now  become  for  the  Southern  Pacific 
system  a  charge  many  times  that  sum. 

If  the  American  householder,  puzzling 
over  the  60  per  cent,  increase  of  his  hving 
expenses  in  fifteen  years,  wants  a  solution 
of  his  problem,  let  him  for  a  time  con- 
template these  facts.  Let  him  also  remem- 
ber that  they  are  merely  typical  of  the  gen- 
eral railroad  condition  and  need  only  to  be 
multiplied  into  the  number  of  "systems"  to 
furnish  much  of  the  stupendous  sum  repre- 
sented in  the  augmented  cost  of  Uving.  For 
in  ten  years  the  railroad  capitalization  of 
this  country,  now  eighteen  and  one  half 
billion  dollars,  has  increased  seven  billion 
dollars — being  in  effect  a  National  debt, 
the  interest  of  which  is  le\ded  upon  us  as 
tribute. 

How  do  we  pay  this  tribute? 

Let  us  see.  On  January  i,  1909,  the 
transcontinental  railroad  lines  increased  the 
freight  rates  18  per  cent,  on  east-bound  traf- 
fic and  a  little  more  on  west-bound  traffic. 

Conservative  authorities  in  California 
estimated  that  this  increase  of  rates 
meant  an  increase  of  $10,000,000  a  year 
in  the  living  expenses  of  the  people  of 
California. 

California  has  probably  400,000  families. 
This  means  an  average  increase  of  $25  a 
family. 

Accomplished  by  merely  one  increase  of 
rates. 

By  reason  of  this  same  increase  of  rates 
the  market  value  of  Southern  Pacific  secur- 
ities rose  nearly  $100,000,000.  By  reason 
of  this  increase  of  market  values  the  estate 
of  the  late  E.  H.  Harriman,  at  first  appraised 


The  Paying  of  the  Bill 


509 


*  at  $149,000,000,  was  found  on  examination 
to  be  worth  $220,000,000. 

Twenty-five  dollars  taken  yearly  from 
each  family  in  California;  $71,000,000  piled 
upon  the  private  fortune  at  the  other  end. 
From  the  householder  to  the  vault  of  the 
railroad  magnate  a  million  pumps  pumping 
dollars. 

What  do  you  get  for  this  tax  laid  three 
times  a  day  upon  the  Hving  of  your  house- 
hold? It  is  your  money,  the  railroad  com- 
pany takes  it  from  you  and  adds  it  to  the 
great  fortunes.     What  do  you  get? 

Let  us  look  into  that  next. 

Whoever  will  consider  carefully  and  im- 
partially the  subject  of  freight  rates  in 
America  will  be  drawn  to  the  conclusion 
that  the  so-called  science  or  system  of 
making  these  rates  consists  merely  of  dis- 
cerning how  much  can  be  extracted  from 
any  community  without  inciting  it  to 
resistance,  and  from  any  branch  of  traffic 
without  destroying  it.  Simply  this  and 
nothing  more. 

HOW    RAILROAD    RATES    ARE    REALLY   FIXED 

Now,  you  will  not  believe  this  until  I 
prove  it  to  you  because  you  have  long  been 
accustomed  to  hear  foolish  chatter  about 
the  enormous  difficulties  of  rate  making  and 
because,  naturally,  you  have  assumed  that 
in  making  rates  there  is  considered  the  cost 
of  the  service,  the  amount  of  investment  and 
the  interest  thereon,  with  taxes,  insurance, 
and  other  expenses,  and  what  would  con- 
stitute a  just  and  reasonable  profit. 

I  think  it  would  be  difficult  to  instance  any 
railroad  rate  in  America  made  on  any  such 
basis. 

In  America,  railroad  rates  are  made  under 
the  pressure  of  an  inexorable  necessity  cre- 
ated by  fictitious  capitalization  and  fraud- 
ulent expenditures.  The  necessity  is  to 
wring  from  every  transaction  the  last  ob- 
tainable cent.  Justice  has  and  can  have 
no  place  in  the  consideration.  What  the 
traffic  will  bear  is  the  one  standard  and  that 
means,  plainly  translated,  what  the  shipper 
can  he  forced  to  pay. 

At  first  thought  this  sounds  unfair  and 
partisan.  It  is  neither.  It  is  only  a  cold 
statement  of  facts.  It  seems  unfair  be- 
cause we  like  to  think  there  is  reason  in  all 
things.  About  other  things  I  do  not  pre- 
tend to  say,  but  about  rate  making  I  know 
there  is  no  reason  other  than  the  reason  I 
have  mentioned.     The  next  time  you  read 


any  profound  observations  by  one  railroad 
lackey  or  another  on  the  intricate  and 
wonderful  science  of  rate  making  and  the 
awe  with  which  we  should  regard  it,  you 
might  recall  some  plain  facts  I  shall  now 
give  you.  They  may  help  to  a  just  esti- 
mate of  the  railroad  lackey  and  also  cheer 
your  expense  account  with  some  delicious 
humor — of  a  certain  kind. 

Here  we  go  then,  taking  things  at  random 
and  merely  as  samples. 

SOME  ILLUMINATING  RAILROAD  ARITHMETIC 

versus  your  poc^etbook 

On  a  carload  of  coffee,  San  Francisco  to 
New  York,  3,240  miles,  the  freight  rate  is 
$180.  From  San  Francisco  to  Phoenix, 
Arizona,  a  distance  of  900  miles  and  over 
the  same  line,  the  freight  rate  for  the  same 
car  is  $240. 

From  Pacific  Coast  points  (San  Fran- 
cisco, Los  Angeles,  et  cetera)  to  Phoenix, 
Arizona,  the  freight  rate  on  sugar  is  $1  a 
hundred  pounds  in  car  load  lots.  From  the 
same  points  to  Memphis,  Tennessee,  about 
1,200  miles  farther,  the  freight  rate  on 
sugar  is  60  cents  a  hundred  pounds.  From 
San  Francisco  to  Cheyenne,  Wyoming,  1,270 
miles,  the  rate  is  55  cents. 

California  produces  most  excellent  raisins, 
but  the  people  of  the  Eastern  states  cannot 
generally  avail  themselves  of  this  abundant 
product  because  the  freight  rate  to  the  At- 
lantic Coast  is  $1.10  a  hundred  pounds. 
Yet  asphaltum  is  hauled  from  the  Pacific  to 
the  Atlantic  Coast  for  only  55  cents  a  hun- 
dred pounds.  The  raisin  traffic  will  bear 
$1.10  and  the  asphaltum  traffic  will  bear 
only  one  half  of  that. 

Cotton  goes  from  Dallas,  Texas,  to  China, 
7,500  miles,  by  way  of  Seattle  for  $1.35  a 
hundred  pounds.  Of  the  7,500  miles  in  this 
haul  2,500  are  by  rail.  For  hauling  the  same 
cotton  from  Dallas  to  New  Orleans,  567 
miles,  the  rate  is  60  cents  a  hundred  pounds 
— or  nearly  one  half  the  cost  of  the  7,500 
mile  haul  to  China,  2,500  of  which  is  by 
rail. 

A  CHINAMAN   DECIDES   WE   ARE   CRAZY 

Not  long  ago  an  American  captain  was  in 
Hankow,  China,  loading  pig  iron  for  Los 
Angeles.  The  Chinese  merchant  with  whom 
he  dealt  was  both  intelligent  and  curious. 
He  wanted  to  know  what  was  the  cost  of 
carrying  iron  so  far.  The  captain  said  the 
freight  rate  was  $6  a  ton. 


510 


Hampton's  Magazine 


ROBERT  E.  PATTISON,  FORMER  GOVERNOR  OF 
PENNSYLVANIA,  AND  HEAD  OF  THE  PA- 
CIFIC RAILWAY  COMMISSION. 


"How  much  of  that  does  the  steamer 
get?"  asked  the  merchant. 

"  Four  dollars  a  ton. " 

"Then  the  iron  must  travel  a  long  dis- 
tance by  railroad,"  said  the  merchant. 

"No,"  said  the  captain,  "a  very  short 
distance — only  twenty-two  miles  from  San 
Pedro  harbor  to  Los  Angeles. " 

"Show  it  to  me  on  your  map,"  said  the 
merchant,  exuding  incredulity. 

The  map  was  produced  and  the  merchant 
studied  it  carefully,  following  with  his  finger 
the  steamer's  route  from  Hankow  down  the 
river  700  miles  to  the  ocean,  then  across 
5,000  miles  of  ocean  to  San  Pedro.  With 
this  he  compared  the  almost  imperceptible 
distance  from  San  Pedro  to  Los  Angeles. 
His  conclusion  was  that  the  captain  was 
lying;  the  thing  was  manifestly  impossible. 
Waybills  and  receipts  made  no  impression 
upon  him.  Either  the  captain  was  a  mon- 
strous and  malicious  liar,  or  the  American 
people  were  crazy.  Politeness  and  prob- 
ability forbade  him  to  accuse  an  entire  na- 
tion of  lunacy;  hence  the  fault  lay  with  the 
captain. 

But  the  captain  was  not  lying;  he  was 
telling  the  truth.  The  traffic  between  Los 
Angeles  and  San  Pedro,  its  harbor,  is  indis- 
pensable; therefore  it  can  bear  a  great  deal. 


You  can  ship  some  kinds  of  freight  from  an 
American  port  to  a  European  port  and  back 
for  the  cost  of  moving  the  same  freight  from 
a  ship  in  San  Pedro  harbor  to  Los  Angeles, 
twenty-two  miles.  The  freight  rate  on  iron 
from  San  Pedro  to  Los  Angeles  is  $2  a  ton ; 
on  other  commodities  it  ranges  from  $2.20 
to  $3  a  ton.  In  addition,  there  is  a  wharfage 
charge  of  50  cents  a  ton.  Well — I  told 
you. 

You  see,  the  traffic  will  bear  these 
charges:  hence  they  are  levied.  There  is  no 
other  reason  for  them  nor  for  any  other 
charges  that  the  Southern  Pacific  makes 
anywhere.  It  gouges  and  grabs  what  it  can 
because  it  needs  every  obtainable  cent  to 
pay  the  interest  and  dividends  on  the  se- 
curities piled  up  by  the  Contract  and  Fi- 
nance Company  and  all  the  other  historic 
devices  the  nature  of  which  I  have  explained 
in  the  foregoing  chapters.  The  Los  An- 
geles merchants  must  have  their  freight 
from  San  Pedro.  There  is  no  other  way  to 
obtain  it.  Hence  the  traffic  will  bear  these 
charges,  which  are  promptly  passed  to  the 
people. 

How  long  the  people  will  bear  them  I  do 
not  pretend  to  say. 

San  Pedro  is  the  harbor  of  Los  Angeles 
and  within  the  city  limits.  San  Diego  is 
126  miles  from  Los  Angeles.  The  rates 
from  Los  Angeles  to  San  Diego  are  about 
the  same  as  the  rates  from  one  end  of  Los 
Angeles  to  the  other.  The  San  Diego  traf- 
fic will  not  bear  quite  so  much  as  the  Los 
Angeles  traffic. 

FREIGHT   RATE   FOR    15,975    MILES,    $4; 
RATE    FOR    2  2    MILES,    $3.50 

On  some  kinds  of  freight,  and  including 
wharfage,  the  rate  is  $3.50  a  ton  from  a  ship 
in  San  Pedro  harbor  twenty-two  miles 
across  Los  Angeles,  and  it  is  $7.50  a  ton  from 
Antwerp  to  San  Pedro  — 16,000  miles  or 
thereabouts. 

The  present  railroad  freight  rates  from 
Sacramento,  California,  to  Reno,  Nevada, 
are  higher  than  the  freight  rates  in  the  old 
days  of  mining,  before  the  railroad  was 
built,  when  all  freight  must  be  dragged  over 
the  mountains  by  mule  and  ox  teams.*  This, 
I  suppose,  is  one  of  the  "benefits"  conferred 
by  the  Big  Four  upon  the  country. 

You  can  ship  certain  kinds  of  freight  from 

•Before  the  Interstate  Commerce  Commission.  Traffic 
Bureau  of  the  Merchants  Exchange  versus  Southern  Pacific 
Company  et  al.      Docket  No.  2839.      Brief  for  complaint,  pp. 


The  Paying  of  the  Bill 


511 


Liverpool  to  San  Francisco  by  way  of  New 
Orleans  for  no  more  than  you  must  pay  on 
the  same  freight  if  your  shipment  originates 
at  New  Orleans  instead  of  Liverpool.* 

Does  not  all  this  seem  strange? 

Yet  the  Southern  Pacific,  it  must  be  con- 
fessed, has  no  monopoly  of  such  mon- 
strosities. 

At  the  mines  in  West  Virginia  soft  coal  is 
worth  $1  a  ton.  When  it  has  been  trans- 
ported to  the  city  of  Washington,  400  miles, 
it  sells  for  $3.50  a  ton.  At  Scranton,  Penn- 
sylvania, a  car  is  loaded  with  anthracite 
coal  worth  less  than  $2  a  ton.  The  next 
morning  it  is  in  New  York  and  worth  $6 
a  ton.  Apparently  the  cost  of  transporting 
coal  100  miles  is  greater  than  the  cost  of 
mining  it. 

In  California,  coal  is  now  so  dear  that  for 
the  poor  it  must  seem  like  a  luxury;  and  yet 
there  are  in  the  mountains  in  Colorado, 
New  Mexico,  and  Utah,  and  in  the  North 
Pacific  states,  great  coal  deposits  that  might 
afford  a  cheap  supply  if  reasonable  freight 
rates  could  be  had.  As  they  cannot,  coal 
is  regularly  brought  to  San  Francisco  from 
Australia. 

THE   RAILROADS    HAVE    NOT   REFORMED 

Every  person  that  consumes  anything 
contributes  to  the  freight  rates,  and  every- 
where these  rates  are  made  in  this  arbitrary 
and  extortionate  manner.  The  natural 
course  of  trade  is  continually  being  dis- 
torted, blockaded,  and  bedeviled  to  give 
more  profits  to  the  railroads,  to  provide 
them  with  longer  hauls,  or  a  chance  for 
bigger  rates.  Communities  are  not  allowed 
to  trade  where  they  can  find  the  best  terms, 
but  only  where  they  will  yield  the  best 
pickings  for  the  railroads.  A  town  forty 
miles  from  St.  Paul  and  400  miles  from 
Chicago  was  compelled  to  go  to  Chicago  for 
its  supplies  because  the  railroads  made  the 
rates  from  Chicago  to  that  town,  400  miles, 
equal  to  or  less  than  the  rates  from  St.  Paul 
to  that  to.wn,  40  miles. 

There  is  an  impression  adroitly  spread  by 
railroad  press  agents  and  railroad  news- 
papers that  all  these  conditions  have  passed 
away  and  the  railroads  have  reformed  their 
practices.  As  a  matter  of  fact,  there  has 
been  no  essential  change. 

The  unjust  rates  continue  year  in  and 
year  out  to  collect  our  tolls. 


*  See  162  U.  S..  197. 


CHARLES  M.  HAYS,  WHO  RESIGNED  FROM  THE 
PRESIDENCY  OF  THE  SOUTHERN  PACIFIC  BE- 
CAUSE ITS  FREIGHT  RATES  WERE  UNJUST. 

Some  of  the  least  defensible  of  these  ex- 
tortions are  practiced  in  California  and  help 
materially  to  gather  the  means  for  the  divi- 
dends and  interest  on  the  securities  we  have 
been  considering. 

For  example,  I  call  attention  to  extracts 
from  the  Southern  Pacific's  freight  tariffs 
showing  rates  from  San  Francisco  and  from 
Los  Angeles.  If  you  are  unfamiliar  with 
railroad  rates  I  may  be  allowed  to  explain 
that  the  practice  is  to  charge  less  for  freight 
in  car  load  lots  than  for  freight  in  smaller 
quantities.  This  occasions  the  division  into 
rates  for  car  load  and  rates  for  less  than 
car  load.     (See  table  on  the  following  page.) 

WHY    HAYS    RESIGNED    THE    PRESIDENCY    OF 
THE    SOUTHERN   PACIFIC 

I  will  now  recite  for  your  entertainment 
a  little  chapter  of  history  showing  that 
these  abuses  are  not  only  flagrant  and  in- 
tolerable but  firmly  rooted. 

C.  P.  Huntington  died  in  1900. 

At  that  time,  one  of  the  American  railroad 
executives  most  talked  about  for  sagacity, 
energy,  skill,  knowledge,  and  results  was 
Mr.  Charles  M.  Hays. 


613 


Hampton's  Magazine 


To 

Miles 

Less  Than  Car  Load 

Car  Load 

From 

I  St 

Class 

Rate 

per   100 

Pounds 

2d 

Class 

Rate 

per   100 

Pounds 

3d 

Class 

Rate 

per   100 

Pounds 

4th 

Class 

Rate 
per   100 
Pounds 

Sth 
Class 
Rate 

Ton 

Class  A 
Rate 

Ton 

Class  B 
Rate 

per 
Ton 

Class  C 
Rate 

per 
Ton 

Los  Angeles 
San  Francisco 

Goshen. ...... 

1 1 

241 
241 

$0 

79 
63 

$0 

76 
58 

$0 

71 
54 

$0 

67 
51 

$10.80 
8.30 

$11.60 
7.65 

«7 

s 

90 
20 

$6.90 
455 

Los  Angeles 
San  Francisco 

Exeter 

<  1 

241 
247 

80 
67 

77 
62 

73 
58 

69 

55 

11.20 
8.90 

11.60 

8.25 

7 
5 

90 

65 

6.60 
4.80 

Los  Angeles 
San  Francisco 

Tulare 

<  i 

231 
240 

76 
69 

71 
64 

67 
59 

64 
55 

10.20 
9.10 

11.60 
8.40 

7 
5 

85 
70 

6.60 
S-oo 

Los  Angeles 
San  Francisco 

Porterville. .  .  . 

224 
264 

76 
73 

72 
68 

68 
64 

65 
61 

10.40 
9.90 

11.60 
925 

7 
6 

75 
00 

6.60 
5.20 

Los  Angeles 
San  Francisco 

Oil  City 

179 
315 

80 
90 

76 
84 

71 
78 

67 
73 

10.60 
.11.80 

10.80 
10.95 

6 

7 

95 

75 

6.30 
6.70 

Los  Angeles 
San  Francisco 

Bakersfield.. .  . 

1 1 

168 
303 

71 
83 

68 

77 

64 

72 

61 
68 

9.60 
11.00 

10.00 
10.15 

6 
6 

15 

75 

550 
5-90 

Los  Angeles 
San  Francisco 

Olig 

218 
353 

83 
86 

79 
79 

75 
74 

72 
70 

11.40 
11.40 

13.30 
10.5s 

7 
7 

55 
00 

6.90 
6.05 

Los  Angeles 
San  Francisco 

McKittrick... 

216 
351 

76 

85 

70 
78 

66 

73 

63 
69 

10.00 
11.20 

13   30 
10.35 

6 

7 

75 
00 

6.10 
6.05 

Los  Angeles 
San  Francisco 

Fresno . . . . 

276 

195 

80 
55 

77 
51 

73 
47 

69 
44 

11.20 
7.20 

11.60 
6.70 

8 
4 

00 
60 

7.00 
4-05 

Los  Angeles 
San  Francisco 

Visalia 

249 
248 

79 
66 

76 
61 

71 
57 

67 

54 

10.80 
8.70 

11.60 

8.05 

7 
5 

90 

45 

6.60 
4.80 

Los  Angeles 
San  Francisco 

Coalinga 

<  ( 

290 
269 

86 
80 

78 
73 

74 
69 

71 
66 

11.40 
10.70 

14.80 
10.05 

8 
6 

00 
20 

7.00 

5-45 

Los  Angeles 
San  Francisco 

Hanford 

248 
233 

79  i 

63; 

76 
58 

71 
54 

67 
51 

10.80 
8.30 

11.60 
7.65 

7 
5 

90 
20 

6.90 
4-55 

SOME    OF    THE    CURIOSITIES    OF    THE    CALIFORNIA    FREIGHT    RATES- 

THE  COUNTRY. 


-THE    HIGHEST    IN 


Mr.  Hays  was  selected  to  take  the  place 
of  Mr.  Huntington  as  head  of  the  great 
Southern  Pacific  system.  He  remained  less 
than  a  year  when,  to  the  amazement  of  the 
railroad  world,  he  suddenly  resigned. 

Everybody  knew  there  must  have  been 
some  trouble  and  all  railroad  men  knew  that 
the  trouble  was  not  with  Mr.  Hays.  Al- 
most at  once  he  was  snapped  up  by  the 
Grand  Trunk,  of  which  vast  and  extending 
system  he  is  still  the  chief  commander. 

Mr.  Hays  never  publicly  explained  his  dis- 
satisfaction, but  according  to  close  friends 
of  his  he  began,  soon  after  he  took  the 
Southern  Pacific,  to  examine  the  freight 
tariffs  by  which  this  company  gathers  the 
interest  on  all  these  securities.  Mr.  Hays  is 
known  to  be  a  just  man.    It  seemed  clear 


to  him  that  the  rates  were  indefensible  and 
ought  to  be  adjusted.  He  undertook  to  ad- 
just them.  The  power  behind  the  railroad 
that,  being  greater  than  all  law  and  all 
government,  had  for  many  years  thriven 
upon  these  extortions,  objected  to  the 
changes  Mr.  Hays  desired.  Mr.  Hays  in- 
sisted; the  Power  insisted.  Finding  that 
the  Power  was  supreme  and  that  he  could 
not  do  justice,  Mr.  Hays  resigned. 

How  do  you  like  this  little  story? 

I  need  not  inquire  of  certain  newspaper 
valets  and  hired  men  of  the  Southern  Pa- 
cific. I  know  they  will  not  like  it  at  all  be- 
cause at  once  they  will  see  that  it  is  true  and 
extremely  distasteful  to  their  employers. 
Their  natural  impulse  will  be  to  deny  it,  a 
course  to  which  they  are  cordially  invited. 


The  Paying  of  the  Bill 


513 


For  all  these  things  the  railroad  company 
has  usually  its  excuse — not  always,  but 
usually. 

From  Oakland  to  Lompoc,  about  314 
miles,  the  Southern  Pacific  within  the  last 
two  years  gave  to  one  lumber  company  a 
rate  of  $4  a  thousand  and  to  another  a  rate 
of  $7.50.  When  one  of  the  railroad's  of- 
ficers was  on  the  witness  stand  before  the 
Interstate  Commerce  Commission,  he  was 
asked  why  the  $4  rate  was  made.  He  re- 
plied airily  that  it  was  to  meet  "water 
competition."  This  is  a  favorite  excuse 
with  the  railroad  companies.  With  wonder- 
ful effrontery  they  offer  it  for  rates  to  points 
a  thousand  miles  from  any  water  route.  So 
in  this  case  the  young  man  said  "water 
competition"  as  if  the  words  were  a  finality. 

Then  the  commission  suddenly  exhibited 
the  rate  of  $7.50  to  the  other  company  and 
for  once  a  railroad  company  was  silenced. 
Apparently  it  could  think  of  no  way  to 
twist,  duck,  or  dodge  out  of  the  dilemma, 
nor  even  to  insult,  bulldoze,  or  browbeat  the 
commission;  a  situation  rare  in  the  com- 
mission's experience. 


When  Manager  H.  A.  Jones  of  the  South- 
ern Pacific  came  to  the  stand  in  Los  Angeles, 
January,  1909,  he  was  much  more  frank. 
At  San  Francisco  and  Los  Angeles  and,  I 
believe,  at  other  junction  points,  the  South- 
ern Pacific  exacts  a  switching  charge  (so- 
called)  of  $2.50  a  car.  There  is  no  sense  in 
this  charge.  It  represents  no  service 
performed  nor  anything  else  except  an 
arbitrary  exaction.  Mr.  Jones  was  asked 
why  his  company  levied  this  charge.  He 
answered  promptly  and  truthfully  that  it 
levied  the  charge  "because  it  could  get  the 
money." 

When  the  "water  competition"  bogey 
will  not  serve,  the  company  can  usually 
allege  something  about  the  peculiarity  of 
the  haul  or  of  the  business.  One  of  these 
allegations  can  stand  for  all  and  is,  more- 
over, a  lovely  example  on  its  own  account. 
Thus: 

Some  of  the  glaring  inequalities  set  forth 
in  the  table  on  the  opposite  page  are  de- 
fended (by  the  railroad's  champions)  on  the 
ground  that  there  is  a  long  ascent  north  of 
Los  Angeles;  therefore  the  rate  from  Los 


HOW  THE  SOUTHERN  PACIFIC  R.\ILROAD,  BY  ITS  OWNERSHIP  OF  THE  PACIFIC   MAIL  S.S.  COM- 
PANY,  CONTROLS  THE  FREIGHT  RATE  BY  WATER  FROM   NEW  YORK  TO  SAN  FRANCISCO. 


514 


Hampton's  Magazine 


ISIDOR   JACOBS,   WHO    IS    URGING    A    GOVERN- 
MENT   STEAMSHIP    LINE    FROM    SAN 
FRANCISCO  TO  PANAMA. 

Angeles  to  Goshen  should  be  higher  than  the 
rate  from  San  Francisco  to  Goshen,  although 
the  distance  is  the  same.  This  is  as  good  as 
any  other  defense  for  the  railroad;  and  how 
good  this  is  you  may  learn  from  the  fact 
that  y^  per  cent,  of  the  goods  shipped  from  San 
Francisco  to  Goshen  have  already  been  hauled 
up  that  hill  north  of  Los  Angeles  without  the 
least  increase  in  rates  therefor.  That  is  be- 
cause they  have  been  shipped  from  the 
Eastern  states  over  that  route.  And  yet 
the  charge  for  the  241  miles  from  San 
Francisco  to  Goshen  is  about  18  per  cent, 
less  than  the  charge  for  the  241  miles  from 
Los  Angeles  to  Goshen — because  of  that  hill! 

The  hill  is  a  great  matter  when  you  ship 
goods  from  Los  Angeles  to  Goshen.  It  is 
nothing  when  you  ship  goods  from  New 
Orleans  to  Goshen  by  way  of  Los  Angeles. 

Is  it  really  necessary  to  be  perfectly  absurd 
that  we  may  defend  our  sacred  corporations? 

Of  course,  the  shippers,  as  a  rule,  do  not 
care  very  much.  Why  should  they?  It  is 
none  of  their  affair;  the  charge  merely  be- 
comes a  part  of  the  price  to  the  consumer, 
and  so  long  as  that  price  is  not  great  enough 
to  interfere  with  trade,  the  shipper  need  not 
bother  about  it.  Changes  in  rates  may 
cause  actual  losses  to  merchants,  but  high 
rates  bear  only  upon  the  consumer.  And 
th3  consumer?     Oh,  well,  he  never  knows. 


The  charge  is  concealed  in  the  prices 
of  his  beefsteak  and  potatoes,  and 
while  these  mount  steadily  upon  him 
he  blames  the  farmer  or  the  packer. 
Therefore,  on  with  the  game!  It  can 
be  played  without  limit. 

First  the  stock  issued  gratuitously  to  the 
fortunate  insiders;  then  the  freight  rate 
made  to  secure  dividends  on  this  stock ;  then 
more  stock;  then  more  rates.  All  passed 
along  to  the  consumer  and  he  never  objects, 
bless  his  heart,  but  pays  his  bills  like  a 
little  man. 

THE  RAILROAD  GOBBLES  THE  TARIFF  PROFIT 
ON  LEMONS 

The  California  producer  has  not  been  so 
well  tamed.  He  has  been  protesting  forty 
years  because  the  railroad  company,  apply- 
ing its  favorite  formula  in  a  way  we  must 
now  consider,  has  steadily  absorbed  all  his 
profits. 

Take  oranges  and  lemons.  In  the  cele- 
brated orange  rate  case  which  dragged 
along  six  years,  Mr.  Joseph  H.  Call,  of  L03 
Angeles,  showed  that  under  the  prevailing 
freight  rate  the  average  profit  left  to  orange 
growers  was  13  cents  a  box,  without  any 
allowance  for  decay  or  damage,*  while  the 
railroad  company  took  90  cents  a  box  for 
freight.  That  was  what  the  orange  traffic 
would  bear. 

At  the  end  of  the  six  years'  fight  through 
the  Interstate  Commerce  Commission  and 
the  courts  there  was  secured  a  final  judg- 
ment reducing  the  charge  from  $1.25  to 
$1.15  a  hundred  weight.  This  meant  a  sav- 
ing to  the  orange  growers  of  $1,000,000  a 
year  in  freight  rates.  The  ground  of  the 
decision  was  that  $1.15  was  a  fair  rate. 
This  seems  to  raise  the  questions: 

(i)  How  about  the  years  in  which  the 
company  was  collecting  an  unfair  rate? 

(2)  Who  is  to  recompense  us  for  that  im- 
position? 

As  to  what  lemons  would  bear,  the  rail- 
road company  slightly  erred.  Some  years 
before,  it  had  conceived  the  idea  that  the 
lemon  traffic  would  bear  an  increase  of  15 
cents  a  box  in  the  freight  rate  and  had 
accordingly,  and  for  no  other  reason,  an- 
nounced the  increase.  The  lemon  growers 
protested  vehemently  and,  of  course,  in  vain; 
such  protests  are  usually  in  vain.  All  the 
profit  of  lemon  growing  was  swept  away 

*  Senate  Committee  on  Interstate  Commerce,  Proceedings 
of  May  17,  1905. 


The  Paying-  of  the  Bill 


515 


in  that  15  cents  of  rate  increase;  the  pro- 
ducers were  now  growing  lemons  at  an 
actual  loss.  When  this  fact  had  been  dem- 
onstrated, the  growers  began  to  cut  down 
their  trees  and  turn  the  land  to  other  crops. 

This  practical  proof  that  their  calcula- 
tions had  been  wrong  and  the  lemon  traffic 
would  not,  after  all,  bear  the  additional 
tribute  they  sought  to  extort  was  all  the 
railroad  managers  needed.  They  wanted 
the  profits  of  lemon  growing  but  they  could 
understand  that  if  there  were  no  lemons  there 
would  be  no  profits,  so  they  rescinded  the 
increase,  went  back  to  the  old  rate,  and  in- 
duced the  growers  to  replant  their  orchards. 

So  Akbar  remitted  the  tribute  levied  upon 
a  conquered  province  when  he  found  that 
the  people  had  been  stripped  to  their  skins. 

From  this  time  until  November  15,  1909, 
the  lemon  rate  was  $1  a  box,  California  to 
Eastern  points. 

Aside  from  freight  rates,  the  only  serious 
trouble  about  the  lemon  business  in  Cali- 
fornia is  the  limit  of  the  demand.  Cali- 
fornia lemons  are  of  unusual  excellence;  but 
after  all,  the  lemon  in  its  pristine  state  and 
undiluted  remains  more  a  fruit  of  utility 
than  of  desire;  few  persons,  we  may  believe, 
devour  lemons  for  delight  therein.  So  far 
as  the  California  lemon  could  be  delivered 
at  all  in  America  it  superseded,  on  merit, 
all  others;  but  because  of  the  freight  rates 
it  seldom  had  a  chance  east  of  t-he  Alle- 
ghenies.  The  center  of  its  distribution  was 
Des  Moines,  Iowa,  and  the  Atlantic  states 
continued  to  get  their  lemons  from  the 
Mediterranean. 

Of  the  annual  American  consumption  of 
12,000  car  loads  of  lemons,  California  fur- 
nished only  about  4,800  car  loads,  although 
quite  able  to  furnish  all. 

The  Californians  long  agitated  for  an  in- 
crease in  the  import  duty  on  lemons,  that 
the  handicap  of  their  freight  rates  might  be 
equalized  and  the  California  lemon  have  a 
chance  on  the  Atlantic  seaboard.  At  last 
their  desires  were  gratified.  The  new  tariff 
of  August  5, 1909,  raised  the  duty  on  lemons 
50  per  cent. 

The  lemon  growers  rejoiced  and  were  ex- 
ceeding glad.  Their  joy  lasted  two  months. 
In  October,  the  Southern  Pacific  announced 
that  on  November  15th  it  would  raise  the 
lemonratei5centsabox,orfrom$i  to$i.i5.* 


G.  W.  LUCE,  GE.\ERAL   FREIGHT  AGENT  OF 
THE  SOUTHERN  PACIFIC  RAILROAD. 

This,  you  will  understand,  is  the  mini- 
mum. On  some  hauls  the  rate  was  raised 
to  $1.25,  $1.35,  and  $1.40. 

Faithful  to  its  good,  old,  and  only  princi- 
ple in  rate  making,  the  Southern  Pacific  had 
grabbed  the  additional  profit  for  itself.  The 
lemon  traffic  would  now  bear  the  1 5  cents  it 
would  not  bear  before,  and  the  railroad 
needed  that  15  cents  to  pay  dividends  on 
fictitious  stock. 

J.    H.    CALL    FIGHTS    THE    SOUTHERN    PACIFIC 

This  time  the  lemon  growers  combined 
against  the  extortion  and  brought  into  the 
case  the  Mr.  Joseph  H.  Call  of  whom  I  have 
before  spoken.  I  am  bound  to  think  him 
a  remarkable  man,  although  my  inclining 
toward  such  distinctions  is  small.  Much  of 
his  life  has  been  spent  in  fighting  railroad 
corporations,  apparently  on  conviction  and 
principle  and  not  for  the  harlotry  of  the 
professional  advocate.  He  fought  the 
Southern  Pacific  to  a  standstill  in  that 
settler's  case  (Southern  Pacific  versus  Otto 
Groeck)  referred  to  in  the  July  issue  of  this 
magazine,*  and  it  was  he  that  showed 
that  in  the  Mussel  Slough  massacre  the  rail- 


*  Before  the  Interstate  Commerce  Commission.  Arlington 
Heights  Fruit  Exchange  et  al.  versus  Southern  Pacific  Com- 
pany cl  al.     Petition,  p.  17. 


*  See  "  Speaking  of  Widows  and  Orphans,"  Hampton's  Mag- 
azine, July,  iQio. 


516 


Hampton's  Magazine 


road  company  had  no  more  legal  than 
moral  right.  As  special  counsel  for  the 
government  he  recovered  more  than  four 
million  acres  of  grabbed  land  from  the 
Southern  Pacific* 

Mr.  Call  took  up  the  case  of  the  lemon 
growers  and  got  in  the  United  States  Circuit 
Court  an  injimction  restraining  the  railroad 
from  collecting  the  increased  rate.  When 
it  became  evident  that  he  would  secure  in- 
junctions all  along  the  line,  the  railroad 
company  desisted  for  the  time  being  and 
agreed  to  hold  the  new  rate  in  abeyance 
until  the  issue  should  be  determined  by  the 
higher  courts. 

Apparently  the  counsel  for  the  lemon 
growers  was  just  in  time.  Since  he  got  his 
injunction,  the  Supreme  Court  has  decided 
in  a  similar  case  that  railroads  must  be  sued 
in  the  state  where  they  are  incorporated. 
If  that  ruling  had  applied  here,  the  injunc- 
tions would  have  been  dissolved  and  the 
suits  begun  anewf  in  Kentucky,  where 
(with  great  foresight)  the  Southern  Pacific 
is  incorporated  and  where  it  has  no  trackage 
and  does  no  business. 

THE     HUGE     MACHINERY     OF     LAW     IN     THE 
INTERSTATE   COMMERCE    COMMISSION 

Meantime,  Mr.  Call  brought  the  case  be- 
fore the  Interstate  Commerce  Commission. 
That  sounds  easy:  in  reality  it  was  a  stu- 
pendous task.  Every  company  that  han- 
dles any  part  of  any  lemon  shipment  must 
be  served  with  a  summons.  The  original 
petition  in  the  case  contained  six  pages  of 
the  names  of  companies  necessarily  sued  as 
codefendants,  about  400  in  all,  many  of 
them  railroads  long  since  absorbed  in  the 
great  combinations.!  An  amended  petition 
filed  a  few  weeks  later  contained  the  names 
of  sixty-three  additional  and  microscopic 
concerns  that  previously  had  been  over- 
looked. 

Every  one  of  these  it  was  necessary  to 
serve,  for  to  sue  railroad  companies  in  this 
country  is  no  holiday  performance,  be  as- 
sured. You  can  sue  men  in  five  minutes, 
but  to  sue  a  railroad  company  may  take  five 
years.  When  at  last  all  had  been  served, 
the  Interstate  Commerce  Commission  took 
up  the  case  and  on  June  11,  1910,  decided 
that  the  lemon  rate  should  be  $1.     The 

•See  146  U.  S.,  570-619,  and  168  U.  S.,  1-66,  and  189  U.  S., 
447- 

t  See  215  U.  S.,  SOI. 

t  Before  the  Interstate  Commerce  Commission.  Arlington 
Heights  Fruit  Exchange  et  al.  versus  Southern  Pacific  Com- 
pany et  al.     Petition,  pp.  3-9. 


railroads  were  expected  to  appeal  from  this 
decision,  whereupon  the  contest  would  have 
been  transferred  to  the  courts  —  to  last 
there  for  years  and  years.  Instead  of  ap- 
pealing, the  railroads,  probably  because  of 
the  very  unusual  public  interest  in  the  case, 
agreed  to  allow  the  rate  to  remain  at  $i. 

This  was  something  of  a  novelty  in  the 
experience  of  the  sorely  tried  American  ship- 
per. Ordinarily,  the  case  would  have  been 
heard  by  the  commission,  which  would  have 
entered  an  order  against  the  railroads  com- 
manding them  to  "cease  and  desist"  from 
charging  the  $1.15  rate,  so  that  if  the  rail- 
roads were  to  reduce  the  rate  to  $1,143^ 
they  would  be  complying  with  the  commis- 
sion's order. 

But  the  railroads  would  not  give  even  so 
much  heed  to  the  order.  They  would  take 
the  matter  into  the  Federal  Courts  and 
about  four  years  later  the  complaining 
lemon  growers  would  learn  whether  they 
were  to  keep  their  profits  or  continue  to 
hand  them  to  the  railroad  company. 

You  think  this  is  pessimistic,  unfair,  or 
prejudiced,  but  it  merely  states  the  prevail- 
ing conditions.  Most  of  the  Interstate 
Commerce  cases  take  longer.  "Cincinnati 
and  Texas  Railroad  versus  Interstate  Com- 
merce Commission"  took  six  years;  "Texas 
Railway  versus  same,"  seven  years;  "In- 
terstate Commerce  Commission  versus  Ala- 
bama Railway,"  five  years;  "Interstate 
Commerce  Commission  versus  Chicago  Rail- 
way," eight  years;  "Missouri  Pacific  versus 
United  States,"  ten  years,*  by  which  time 
everybody  connected  with  the  original  suit 
had  died  or  forgotten  all  about  it  and  the 
court  threw  it  out  on  that  ground. 

THE  RAILROADS  GET  THE  FAT  OF  THE  TARIFF 

Much  wondering  attention  was  called  to 
the  lemon  tariff'  grab,  as  if  it  were  something 
quite  new.  As  a  matter  of  fact,  the  only 
strange  thing  about  it  is  that  anybody 
should  think  it  strange.  It  is  in  Hne  with 
accepted  railroad  policy  everywhere. 

The  real  beneficiaries  of  the  great  Ameri- 
can protective  tariff  are  not  so  much  the 
manufacturers  or  producers  as  the  railroad 
companies. 

The  railroad  companies  adjust  their  rates 
to  just  below  the  point  where  the  foreign 
article  (plus  the  tariff)  can  be  laid  down  in 
any  given  territory. 

*  Before  the  Senate  Committee  on  Interstate  Commerce 
bearing  on  the  Regulation  of  Railway  Rates,  pp.  1-2. 


The  Paying  of  the  Bill 


517 


They  do  not  wish  to  see  the  American 
producer  crushed,  but  all  the  money  he 
makes  they  purpose  to  take  for  dividends 
and  interest  on  securities  a  la  Contract  and 
Finance  Company. 

I  submit  the  following  convincing  illus- 
trations made  up  from  Mr.  Call's  figures. 
The  basis  is  the  transcontinental  railroad 
rates  between  Pacific  and  Atlantic  or  Lake 
ports  compared  with  freight  rates  from 
abroad. 


Commoility 


Bituminous  Coal 

Portland  Cement 

Steel  Ingots 

Pig  Iron 

Structural  Iron 

Oranges  

Cotton  Goods 

Low  Grade  Dry  Goods 


O  Hi  -a 
2  Ola 


Ton 

$0.67 

1 .60 

8.00 

4.00 

10.00 

20.00 

40.00 

40.00 


Ton  Ton 
$6.00  $6.67 
6 . 00  7 . 60 
6.00  14.00 
6.00  10.00 
6.00  16.00 
3  .  00  23  .  00 
6 .  00  46 .  00 
6 .  00  46 .  00 


Ton 

$6  3ot 
7.00I: 
12.00 
10.00 
1 6 .  00)^ 
23.00 
40.00 
60.00 


Evidently,  here  the  railroad  rate  is  so 
made  that  it  is  a  shade  under  the  tariff  duty 
plus  the  freight  rale  from  abroad.  By  this 
adjustment,  the  importation  of  the  foreign 
article  is  not  encouraged,  but  the  railroad 
company  gets  the  greater  part  of  the 
difference  in  price  between  the  foreign  and 
domestic  article.  In  other  words,  it  gets  the 
real  benefit  of  the  tariff  on  these  commod- 
ities. || 

We  tax  all  else  to  feed  the  manufacturer, 
and  fatten  the  manufacturer  to  feed  the  rail- 
road company. 

THE  "refrigerator  CAR "  HELPS  STEAL 
FROM  YOUR  POCKETBOOK 

But  to  return  to  our  lemons,  the  growers 
of  that  ungracious  fruit  have  still  another 
grievance. 

To  understand  it  well  one  must  know 
about  the  peculiar  functions  of  the  Ameri- 
can refrigerator  car  and  I  am  not  sure  that 
I  can  explain  that  in  a  few  hundred  words, 
but  I  will  try. 

*  "Terminal  rates"  arc  rates  from  one  point  with  water  tran- 
sit to  another,  as  from  Chicago  to  Seattle. 

t  From  Colorado  and  Utah  to  Los  Angeles  and  San  Francisco. 
X  From  the  factories  in  Kansas  to  Pacific  Coast  points. 

I  In  car  load  lots. 

II  Remarkable  though  unintentional  confirmation  of  this  fact 
may  be  found  in  Before  the  Interstate  Commerce  Commission: 
Enterprise  Manufacturing  Company  et  al.  versus  Georgia  Rail- 
road Company  e<_ai.  and  China  and  Japan  Trading  Company 
versus  Georgia  Railroad  Company.  No.  981  and  994.  See  p.  73 
letter  of  J.  O.  Stubbs  to  Howard  Ayres. 


The  transporting  of  perishable  commodi- 
ties in  refrigerator  cars  is  now  a  great  in- 
dustry and  very  important  to  all  of  us  be- 
cause these  cars  bring  us  a  large  part  of  our 
daily  food.  Most  of  these  cars  are  owned 
by  the  Beef  Trust  but  are  used  for  fruit  and 
vegetables  as  well  as  for  meat.  The  Beef 
Trust  compels  the  railroads  to  pay  for  haul- 
ing its  cars  (a  mere  disguise  for  a  rebate) 
and,  in  addition,  gouges  the  consumer 
through  an  onerous  charge  for  ice. 

Before  1906,  the  Beef  Trust  had  contracts 
with  the  Southern  Pacific  by  which  the 
Southern  Pacific,  after  it  had  well  plucked 
the  fruit  grower,  turned  him  over  to  the 
Beef  Trust,  which  in  a  workmanlike  manner 
finished  the  trimming.  When  these  con- 
tracts expired,  gentlemen  that  controlled 
the  Southern  Pacific  could  see  no  reason 
why  the  Beef  Trust  should  have  this  good 
thing  when  they  needed  the  money  them- 
selves, so  they  chased  the  Trust  out  of  the 
game,  organized  a  refrigerator  car  line  of 
their  own,  collected  the  goodly  icing  charges 
and  turned  them  into  the  treasury,  whence 
they  presently  emerged  as  additional  divi- 
dends on  more  watered  stock. 

Now,  it  was  once  thought  necessary  that 
lemons,  oranges,  and  the  like  fruits  moving 
east  from  California  must  be  iced  all  the 
way.  Which  was  good  for  the  refrigerator 
car  lines.  Eventually  the  growers  found 
that  by  a  system  of  precooling  the  fruit,  it 
would  go  through  without  icing  and  arrive 
in  perfect  condition.  So  on  such  shipments 
they  placarded  the  cars  with  this  notice: 


"Do  not  re-ice  in  transit." 


That  was  where  the  additional  grievance 
came  in.  The  notice  never  made  the  least 
difference  to  the  railroad  company.  It  did 
not  re-ice  the  car,  but  it  charged  for  re-icing 
just  the  same — $30  a  car.*  On  something 
like  40,000  cars  of  citrus  fruit  a  year.  Good 
graft. 

Others  besides  fruit  growers  had  griev- 
ances. In  1896,  the  Southern  Pacific  charges 
on  wool  had  become  so  exorbitant  that  wool 
growers  were  threatened  with  ruin  and  were 
driven  back  to  primitive  conditions.  Some 
of  them  abandoned  railroad  transportation 

*  Before  the  Interstate  Commerce  Commission.  Arlington 
Heights  Fruit  Exchange  el  al.  versus  Southern  Pacific  Com- 
pany el  al.  Petition  of  complaints,  pp.  15-16.  The  graft  in- 
volved here  .is  not  much  greater  than  that  involved  in  all  these 
icing  charges,  which  are  everywhere  unjust. 


518 


Hampton's  Magazine 


and  hauled  their  wool  in  wagons  200  miles 
to  a  market,  finding  that  extraordinary  re- 
version to  mediaeval  methods  cheaper  than ' 
to  pay  the  railroad  rates.  To  these  and  to 
the  lemon  growers  that  cut  down  their  or- 
chards the  blessings  of  the  railroad  and  its 
"benefits  conferred"  must  have  seemed 
grimly  farcical. 

Meantime  the  cities,  like  San  Francisco 
and  Los  Angeles,  groaned,  and  so  far  as  they 
dared,  they  protested. 

Every  approach  by  land  was  held  by  the 
Southern  Pacific.  Many  times  the  people 
of  San  Francisco  encouraged  new  lines  of 
railroad  that  promised  competition,  and  the 
city  and  county  granted  subsidies  to  such 
enterprises,  only  to  see  the  new  projects  fall, 
one  after  another,  into  the  hands  of  the 
monopoly. 

But  there  was  always  the  open  road  of 
the  sea.  Monopolies  can  seize  the  land; 
no  one  can  compass  the  sea.  Whenever 
years  of  eflFort  to  establish  competition  or 
get  relief  by  land  had  ended  in  failure,  the 
San  Franciscans  would  turn  to  the  sea. 

HOW    THE    RAILROAD    FIGHTS    COMPETITION 
BY   WATER 

They  found  no  more  relief  there  than  they 
had  found  on  the  land  or  in  competition. 

Two  conditions  stood  in  their  way.  Their 
business  was  with  the  Eastern  states. 
Therefore  it  was  domestic  commerce.  The 
Federal  law  restricted  domestic  commerce 
to  American  ships.  There  were  few  Ameri- 
can ships. 

The  normal,  easy,  and  cheap  transit  for 
their  goods  was  from  New  York  down  the 
Atlantic  coast  to  the  Isthmus  of  Panama, 
across  the  Isthmus  by  the  Panama  Rail- 
road, and  then  up  the  Pacific  to  San  Fran- 
cisco. 

From  New  York  to  the  Isthmus  they 
could  ship  easily.  From  the  Isthmus  to 
San  Francisco  the  only  steamships  were 
those  of  the  Pacific  Mail,  and  the  Pacific 
Mail  was  owned  by  the  Southern  Pacific. 

To  prevent  the  use  of  the  water  route  and 
to  compel  shipments  by  rail,  the  Pacific 
Mail  made  a  prohibitive  rate  between  the 
Isthmus  and  San  Francisco.* 

The  merchants  of  San  Francisco  endured 
this  condition  for  years.  To  end  it,  some 
of  them  organized  an  independent  line  of 
vessels  to  the  Isthmus.     Competition. 

•  The  chief  business  of  the  Pacific  Mail  to  the  south  was  be- 
tween San  Francisco  and  the  west  coast  ports  of  South  America. 


The  Southern  Pacific  made  an  arrange- 
ment with  the  Panama  Railroad  whereby 
for  a  payment  of  $75,000  a  month  *  the 
railroad  agreed  to  let  the  merchants'  freight 
lie  on  the  wharves  instead  of  carrying  it 
across  the  Isthmus.  In  a  short  time  the 
wharves  were  piled  high  with  goods  the 
railroad  made  no  effort  to  move. 

The  merchants  surrendered  before  this 
impossible  condition,  the  independent  line 
was  abandoned,  and  the  situation  drifted 
back  to  the  undisputed  control  of  the 
Southern  Pacific.  Its  subsidy  to  the  Pana- 
ma railroad  for  helping  to  throttle  Cali- 
fornia was  alone  sufficient  to  pay  a  fair  divi- 
dend on  the  Panama's  capital. f 

Substantially,  to  the  merchants,  this  is 
the  situation  to-day. 

But,  you  say,  this  is  very  strange.  The 
Panama  Railroad  and  the  connecting  steam- 
ship line  on  the  Atlantic  are  now  owned  and 
operated  by]the  United  States  Government. 
Surely  the  government  will  not  enter  into 
an  open  alliance  for  plunder  with  the  South- 
em  Pacific. 

No,  but  there  is  something  else  at  work. 

The  Southern  Pacific  continues  to  oper- 
ate the  Pacific  Mail,  and  continues  to  make 
prohibitive  rates.  To-day  the  total  freight 
rate  from  San  Francisco  to  New  York  via 
Panama  is  $8  a  ton.  Of  this,  the  United 
States  Government,  for  the  railroad  haul 
across  the  Isthmus  and  the  water  haul  to 
New  York,  receives  $2.40;  the  Southern 
Pacific,  for  the  shorter  water  haul,  San 
Francisco  to  the  Isthmus,  receives  $5.60. 

To  meet  this  condition  the  obvious  rem- 
edy is  for  the  government  to  operate  steam- 
ships on  the  Pacific  as  it  does  on  the  Atlan- 
tic.   Now  see: 

RAILROAD   SECRETLY  CONDEMNED,   BUT 
OPENLY   ADULATED,    BY   MERCHANTS 

In  San  Francisco,  Isidor  Jacobs,  a  civic 
reformer  noted  for  his  courage,  has  been 
for  seventeen  years  fighting  railroad  extor- 
tion. He  organized  the  old  Traffic  Asso- 
ciation of  California,  which  brought  forth 
the  San  Joaquin  Valley  Railroad  (gob- 
bled by  the  Santa  Fe)  and  the  ill-fated  in- 
dependent line  to  the  Isthmus.  For  two 
or  three  years  he  has  been  laboring  for  a 
government  line  on  the  Pacific.  Largely 
at   his   instigation,   the   government   sent 

*  Report  of  J.  L.  Bristow,  Special  Panama  Railroad  Commis- 
sioner, to  the  Senate  Committee  on  Interoceanic  Canals,  1908, 

t  Commissioner  Bnstow  s  Report,  p.  13. 


The  Paying  of  the  Bill 


519 


J.  L.  Bristow  as  a  special  commissioner  to 
investigate  conditions  pertaining  to  such  a 
line. 

At  San  Francisco,  a  public  meeting  was 
held  under  the  auspices  of  the  Chamber  of 
Commerce,  which,  with  the  two  other  mer- 
cantile associations  of  San  Francisco,  is 
dominated  by  the  Southern  Pacific.  Some 
hundreds  of  merchants  were  present.  Only 
Mr.  Jacobs  spoke  for  the  government  line. 
Other  speakers  praised  with  fulsome  ex- 
pressions the  Pacific  Mail  service  and  man- 
agement, and  opposed  a  government  enter- 
prise. 

Mr.  Jacobs  suggested  that  Mr.  Bristow 
should  invite  the  merchants  to  come  to  him 
privately  at  his  hotel  and  express  their 
opinions.  Mr.  Bristow  adopted  this  sug- 
gestion, and  in  the  next  two  days  about  two- 
score  of  San  Francisco's  free  and  indepen- 
dent American  citizens  crept  Hke  criminals 
into  Mr.  Bristow's  apartments  and  after 
exacting  a  pledge  of  secrecy  told  him  that 
the  Pacific  Mail  service  was  abominable 
and  extortionate  and  a  government  line 
would  be  a  boon.  Many  of  these  were  gen- 
tlemen that  at  the  meeting  had  expressed 
exactly  the  opposite  views.* 

"I  inquired  privately  as  to  the  reasons 
for  the  inconsistent  attitude  of  these  gen- 
tlemen," says  Mr.  Bristow.  He  seems  to 
have  found  out.  "It  was  further  added 
that  the  tremendous  power  in  transporta- 
tion matters  which  this  combination  of 
steamship  and  railway  management  held 
over  the  fortunes  of  San  Francisco  shippers 
would  tend  to  make  them  timid  in  express- 
ing in  public  any  views  that  would  be  dis- 
pleasing to  either  company."  f 

"Tend  to  make  them  timid!"  Between 
the  tyranny  of  a  corporation  in  the  twen- 
tieth century  and  the  tyranny  of  a  satrap 
in  the  first  will  some  one  kindly  point  out 
the  difference?  Some  one  of  the  Glorious 
Spirit  of  Optimism  preferred,  but  anyone 
will  do. 

San  Francisco  never  got  its  govern- 
ment line  and  the  Pacific  Mail  continues 
o  blockade  the  Isthmus  route.  The 
jouthern  Pacific  influence  stopped  this 
<s  it  has  stopped  every  other  relief  for 
jrty  years.  It  is  a  pathetic  spectacle. 
With  the  open-handed  Californian  gener- 
cisity  San  Francisco  has  given  money,  lands, 
\nd    terminals.     In    return    she    has    had 


chiefly  kicks  and  scientific  and  multiplied 
extortion.  I  think  you  can  hardly  find  in 
the  world  the  fellow  to  that  story.* 

To  epitomize  it,  one  should  look  first  at 
the  magnificent  Mission  Bay  property  free- 
ly bestowed  upon  the  railroad,  and  then 
turn  to  contemplate  the  fact  that  at  the 
great  Portola  celebration  in  San  Francisco, 
October,  1909,  the  Southern  Pacific  was  the 
only  institution  that  made  money  from  the 
crowds  and  the  only  institution  that  refused 
to  contribute  a  dollar  to  the  expenses  of  the 
celebration. 

THE    SOUTHERN    PACIFIC    DISOBEYS   THE 
HEPBURN   ACT 

•  Observe  next  how  much  your  laws  avail 
to  restrain  this  corporation. 

The  Hepburn  railroad  rate  regulation  act 
was  passed  by  Congress  in  1906.  It  was  the 
nation's  third  and  most  strenuous  attempt 
to  end  railroad  abuses. 

Four  months  after  it  became  a  law,  all 
men  in  San  Francisco  that  follow  these 
matters  knew  the  Southern  Pacific  was  pay- 
ing no  more  heed  to  the  new  than  it  had 
paid  to  the  old  law  and  was  daily  granting 
the  forbidden  rebate. 

Complaint  was  made  to  the  Interstate 
Commerce  Commission,  and  one  year  later, 
in  October,  1907,  Commissioner  Lane  came 
to  San  Francisco  and  began  a  hearing. 

At  once  it  was  evident  that  the  govern- 
ment's secret  service  agents  and  inspectors 
had  caught  the  railroad  red-handed.  Amaz- 
ing details  were  laid  bare.  It  appeared  that 
rebates  abounded  for  favored  shippers  in 
almost  every  line  of  commerce.  To  record 
these  illegal  transactions  the  Southern 
Pacific  maintained  a  set  of  secret  books, 
twenty  in  number,  called  the  "A"  books,t 
kept  in  a  separate  room  by  a  Mrs.  Cum- 
mins and  a  Miss  Lena  Amundsen.  To 
these  books  no  one  had  access  except  the 
head  manipulator  of  rebates,  and  in  them 
were  set  down  thousands  of  instances  of 
these  forbidden  advantages  to  shippers — 
disguised  mostly,  please  mark,  as  alleged 
claims  for  damaged  goods  or  overcharges — 
under  the  sanction  of  the  General  Freight 
Agent  of  the  Southern  Pacific! 


*  Mr.  Bristow's  Report,  p.  4. 


Ibid.,  pp.  4-5. 


•  As  to  conditions  to-day,  see  report  of  the  Senate  Committee 
on  Federal  Relations,  California  Legislature,  to  be  found  in  the 
Senate  Journal  for  March  23,  1909,  p.  27. 

t  Before  the  Interstate  Commerce  Commission.  In  the  Mat- 
ter of  Rates_,  Practices,  Accounts  and  Revenues  of  Carriers,  at 
San  Francisco,  October  2,  3,  4,  1907.  Testimony  of  J.  M. 
Brewer,  pp.  6,  7,  and  elsewhere. 

t  Ibid.,  p.  7. 


520 


Hampton's  Magazine 


Documentary  evidence  of  these  rebates 
was  submitted  and  by  the  curious  may  now 
be  found  in  the  appendix  to  the  testimony. 

When  the  scandal  had  been  laid  bare  the 
Southern  Pacific,  quite  unabashed,  played 
its  trump  card  and  retired  serenely. 

It  offered  Mr.  G.  W.  Luce,  General 
Freight  Agent,  as  a  witness,  with  the  state- 
ment that  he  could  explain  these  rebates  if 
he  were  sworn. 

Commissioner  Lane  was  not  to  be  so 
trapped.  He  recognized  that  the  swearing 
of  Luce  as  a  witness  would  be  an  "  immun- 
ity bath"  for  him  and  all  his  transactions. 
Therefore,  the  commissioner  declined  to  let 
Mr.  Luce  be  sworn,  but  said  he  might  make 
any  statement  he  cared  to  make.  The 
Southern  Pacific  attorney  would  not  let  Mr. 
Luce  say  anything  except  under  oath.*  And 
thus  the  matter  ended.  The  Southern  Pa- 
cific management  said,  with  much  pretense 
of  righteous  indignation,  that  it  could  ex- 
plain everything  if  it  were  only  allowed,  but 
it  was  not  allowed — which  is  an  excellent 
line  of  talk  for  gabies — and  the  commission, 
of  course,  was  deprived  of  the  advantage 
of  questioning  Mr.  Luce. 

This  was  in  1907.  Some  optimists  may 
think  that  these  lawless  practices  having 
been  thus  indubitably  revealed,  the  South- 
ern Pacific  (in  the  beautiful  phrase  of  regu- 
lation) "ceased  and  desisted"  from  them 
and  joined  the  other  railroads  in  protesta- 
tions of  reform.  To  any  such  persons  I 
commend  a  reading  of  the  decision  of  the 
California  Board  of  Railroad  Commission- 
ers, filed  January  12,  1909,  from  which  it 
appears  that  one  year  after  the  revelations 
before  Commissioner  Lane  the  same  com- 
pany was  dealing  in  the  same  line  of  rebates 
at  the  old  stand. f 

*  Before  the  Interstate  Commerce  Commission.  In  the  Mat- 
ter of  Rates,  Practices,  Accounts  and  Revenues  of  Carriers,  at 
San  Francisco,  October  2,  3,  4,  1907,  pp.  116,  117. 

f  Before  the  Board  of  Railroad  Commissioners  of  the  State 
of  California,  No.  102.  In  the  Matter  of  Alleged  Discrimina- 
tions by  the  Southern  Pacific.  Pages  17  and  18  will  be  found 
particularly  interesting. 


This  incident,  so  characteristic,  so  per- 
fectly typical  of  the  whole  enterprise  from 
its  inception,  may  well  close  our  little  his- 
tory. 

With  the  concentrated  bitterness  that 
the  people  of  California  feel  for  the  South- 
ern Pacific,  we  have  had  nothing  to  do  here. 
Purposely,  I  have  refrained  from  mention- 
ing the  terms  in  which  most  Californians 
usually  refer  to  the  railroad,  and  have  like- 
wise omitted  great  store  of  material  and 
incidents  of  which  the  import  was  malig- 
nant or  personal  or  tending  to  place  upon 
individuals  responsibility  for  a  general  con- 
dition for  which  no  man  should  be  blamed. 

But  I  do  believe  it  to  be  a  fair  conclusion 
that  the  whole  system  upon  which  this 
company  has  been  operated  from  its  first 
stock  subscription  to  this  day  is  largely 
fraudulent,  utterly  wrong,  and  gravely  in- 
jurious to  the  people  of  California  and  to 
the  rest  of  the  country. 

I  do  believe  it  to  be  clear  that  every  dol- 
lar taken  unfairly  or  dishonestly  or  by  clever 
scheming  out  of  this  property  has  been  re- 
paid many  times  from  the  living  expenses 
of  the  people. 

I  do  believe  it  certain  that  all  this  repre- 
sents a  situation  not  much  longer  to  be  en- 
dured if  the  nation  is  to  survive  and  be 
free. 

The  highways  are  the  people's.  Let 
us  return  them  to  the  people  from  whom 
they  have  been  taken  chiefly  by  chican- 
ery, bribery,  and  fraud. 

For  all  these  and  all  the  other  intol- 
erable and  growing  evils  of  our  trans- 
portation system,  for  the  increased 
cost  of  living  demonstrably  produced 
by  the  overissue  of  railroad  securities, 
for  the  menace  in  the  rapid  increase  of 
these  overissues,  and  for  the  corruption 
that  these  influences  always  work  in 
our  public  affairs,  there  is  no  other 
remedy. 

Let  us  begin  to  apply  it  now. 


Editorial  Note. — The  foregoing  article  was  written  before  the  new  Interstate  Com- 
merce Law,  enacted  by  the  last  session  of  Congress,  went  into  effect.  At  the  time  this  number 
of  HAMPTON'S  goes  to  press  it  is  too  early  to  judge  of  the  effect  of  the  new  law  upon  the  rate 
situation  described  in  the  foregoing  pages,  but  it  seems  probable  that  while  the  law,  if  enforced, 
may  operate  to  change  some  details,  the  principle  behind  the  rate-making  will  remain  intact. 


5     31 0  o--r 


